A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two best left off your watchlist.
Two Stocks to Sell:
Etsy (ETSY)
Trailing 12-Month Free Cash Flow Margin: 22.4%
Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NYSE: ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.
Why Do We Think Twice About ETSY?
- Struggled with new customer acquisition as its active buyers averaged 2.1% declines
- Lackluster growth in its average revenue per buyer coupled with its weaker engagement trends led to sluggish demand over the last two years
- Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 1.4% annually
Etsy’s stock price of $84.76 implies a valuation ratio of 14.6x forward EV/EBITDA. Check out our free in-depth research report to learn more about why ETSY doesn’t pass our bar.
Choice Hotels (CHH)
Trailing 12-Month Free Cash Flow Margin: 7.1%
With almost 100% of its properties under franchise agreements, Choice Hotels (NYSE: CHH) is a hotel franchisor known for its diverse brand portfolio including Comfort Inn, Quality Inn, and Clarion.
Why Do We Steer Clear of CHH?
- Revenue per room has disappointed over the past two years due to weaker trends in its daily rates and occupancy levels
- Poor free cash flow margin of 8.8% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $107.97 per share, Choice Hotels trades at 14.6x forward P/E. To fully understand why you should be careful with CHH, check out our full research report (it’s free).
One Stock to Watch:
Atlassian (TEAM)
Trailing 12-Month Free Cash Flow Margin: 20%
Started by two Australian university friends who funded their startup with credit cards, Atlassian (NASDAQ: TEAM) provides software tools that help teams plan, track, collaborate, and share knowledge across organizations.
Why Are We Fans of TEAM?
- Annual revenue growth of 22.8% over the past two years was outstanding, reflecting market share gains
- Average billings growth of 20.5% over the last year enhances its liquidity and shows there is steady demand for its products
- Software is difficult to replicate at scale and results in a best-in-class gross margin of 85.6%
Atlassian is trading at $205.44 per share, or 7.4x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
