While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
IPG Photonics (IPGP)
Trailing 12-Month Free Cash Flow Margin: 6.8%
Both a designer and manufacturer of its products, IPG Photonics (NASDAQ: IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.
Why Should You Sell IPGP?
- Annual sales declines of 4.3% for the past five years show its products and services struggled to connect with the market during this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 20.5% annually, worse than its revenue declines
- Free cash flow margin dropped by 11.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
IPG Photonics is trading at $75.26 per share, or 62x forward P/E. Dive into our free research report to see why there are better opportunities than IPGP.
Bel Fuse (BELFA)
Trailing 12-Month Free Cash Flow Margin: 8.1%
Founded by 26-year-old Elliot Bernstein during the electronics boom after WW2, Bel Fuse (NASDAQ: BELF.A) provides electronic systems and devices to the telecommunications, networking, transportation, and industrial sectors.
Why Does BELFA Worry Us?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 7.1% annually over the last two years
- Earnings per share have contracted by 16.2% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
At $115.50 per share, Bel Fuse trades at 11.9x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why BELFA doesn’t pass our bar.
One Stock to Watch:
Colgate-Palmolive (CL)
Trailing 12-Month Free Cash Flow Margin: 16.9%
Formed after the 1928 combination between toothpaste maker Colgate and soap maker Palmolive-Peet, Colgate-Palmolive (NYSE: CL) is a consumer products company that focuses on personal, household, and pet products.
Why Could CL Be a Winner?
- Products command premium prices and lead to a best-in-class gross margin of 60.2%
- CL is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are climbing as it finds even more attractive growth opportunities
Colgate-Palmolive’s stock price of $84.67 implies a valuation ratio of 22.3x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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