Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may face some trouble.
Two Stocks to Sell:
Entegris (ENTG)
Trailing 12-Month Free Cash Flow Margin: 8.3%
With fabs representing the company’s largest customer type, Entegris (NASDAQ: ENTG) supplies products that purify, protect, and generally ensure the integrity of raw materials needed for advanced semiconductor manufacturing.
Why Are We Out on ENTG?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.5% annually over the last two years
- Sales are projected to tank by 1% over the next 12 months as its demand continues evaporating
- Free cash flow margin shrank by 8.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Entegris’s stock price of $79.62 implies a valuation ratio of 22.7x forward P/E. To fully understand why you should be careful with ENTG, check out our full research report (it’s free).
Portillo's (PTLO)
Trailing 12-Month Free Cash Flow Margin: 1.1%
Begun as a Chicago hot dog stand in 1963, Portillo’s (NASDAQ: PTLO) is a casual restaurant chain that serves Chicago-style hot dogs and beef sandwiches as well as fries and shakes.
Why Is PTLO Not Exciting?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.2% for the last two years
- High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $11.85 per share, Portillo's trades at 32.5x forward P/E. Check out our free in-depth research report to learn more about why PTLO doesn’t pass our bar.
One Stock to Watch:
CrowdStrike (CRWD)
Trailing 12-Month Free Cash Flow Margin: 24.7%
Founded by George Kurtz, the former CTO of the antivirus company McAfee, CrowdStrike (NASDAQ: CRWD) provides cybersecurity software that protects companies from breaches and helps them detect and respond to cyber attacks.
Why Is CRWD Interesting?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Estimated revenue growth of 21.5% for the next 12 months implies its momentum over the last three years will continue
- Strong free cash flow margin of 24.7% enables it to reinvest or return capital consistently
CrowdStrike is trading at $479.10 per share, or 23.8x forward price-to-sales. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. 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 Tecnoglass (+1,754% 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.
