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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, 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:
Verra Mobility (VRRM)
Trailing 12-Month Free Cash Flow Margin: 10.7%
Aiming to wrap technology and data around a historically manual and paper-based industry, Verra Mobility (NASDAQ: VRRM) is a leading provider of smart mobility technology to address tolls and violations, title and registration services, as well as safety and traffic enforcement.
Why Are We Cautious About VRRM?
- Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
- Earnings per share lagged its peers over the last two years as they only grew by 7.4% annually
- 18.3 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
Verra Mobility’s stock price of $4.35 implies a valuation ratio of 3.6x forward P/E. If you’re considering VRRM for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Braze (BRZE)
Trailing 12-Month Free Cash Flow Margin: 7.9%
With its technology powering interactions with 6.2 billion monthly active users across the digital landscape, Braze (NASDAQ: BRZE) provides a platform that helps brands build and maintain direct relationships with their customers through personalized, cross-channel messaging and engagement.
Why Does BRZE Stand Out?
- Billings growth has averaged 32.1% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Estimated revenue growth of 18.8% for the next 12 months implies its momentum over the last two years will continue
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
At $23.82 per share, Braze trades at 2.7x forward price-to-sales. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Onterris (ONT)
Trailing 12-Month Free Cash Flow Margin: 8.7%
Founded to protect a tree-lined two-lane road, Onterris (NYSE: ONT) provides air quality monitoring, environmental laboratory testing, compliance, and environmental consulting services.
What Makes ONT Stand Out?
- Market share has increased this cycle as its 15.4% annual revenue growth over the last five years was exceptional
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 44.4% annually
- Free cash flow margin expanded by 3.8 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Onterris is trading at $20.90 per share, or 12.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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