A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are two cash-producing companies that excel at turning cash into shareholder value and one that may struggle to keep up.
One Stock to Sell:
Monro (MNRO)
Trailing 12-Month Free Cash Flow Margin: 3.4%
Started as a single location in Rochester, New York, Monro (NASDAQ: MNRO) provides common auto services such as brake repairs, tire replacements, and oil changes.
Why Are We Out on MNRO?
- Recent store closures and weak same-store sales point to soft demand and an operational restructuring
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Performance over the past three years shows each sale was less profitable as its earnings per share dropped by 31.9% annually, worse than its revenue
Monro is trading at $15.78 per share, or 41.6x forward P/E. Check out our free in-depth research report to learn more about why MNRO doesn’t pass our bar.
Two Stocks to Buy:
Clover Health (CLOV)
Trailing 12-Month Free Cash Flow Margin: 2.5%
Founded in 2014 to improve healthcare for America's seniors through technology, Clover Health (NASDAQ: CLOV) provides Medicare Advantage plans for seniors with a focus on affordable care and uses its proprietary Clover Assistant software to help physicians manage patient care.
Why Do We Love CLOV?
- Annual revenue growth of 31.2% over the last two years was superb and indicates its market share increased during this cycle
- Adjusted operating margin improvement of 25.6 percentage points over the last five years demonstrates its ability to scale efficiently
- Free cash flow profile has moved into positive territory over the last five years, indicating the company has achieved financial self-sustainability
Clover Health’s stock price of $3.71 implies a valuation ratio of 43.6x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Oscar Health (OSCR)
Trailing 12-Month Free Cash Flow Margin: 21%
Founded in 2012 to simplify the notoriously complex American healthcare system, Oscar Health (NYSE: OSCR) is a technology-focused health insurance company that offers individual and small group health plans through its cloud-native platform.
Why Will OSCR Outperform?
- Impressive 42.6% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Earnings growth has massively outpaced its peers over the last four years as its EPS has compounded at 31.5% annually
- Free cash flow margin expanded by 19.9 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
At $21.02 per share, Oscar Health trades at 19.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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