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 reinvest wisely to drive long-term success and one best left off your watchlist.
One Stock to Sell:
Carnival (CCL)
Trailing 12-Month Free Cash Flow Margin: 11.7%
Boasting outrageous amenities like a planetarium on board its ships, Carnival (NYSE: CCL) is one of the world's largest leisure travel companies and a prominent player in the cruise industry.
Why Are We Out on CCL?
- Demand for its offerings was relatively low as its number of passenger cruise days has underwhelmed
- Free cash flow margin is expected to remain in place over the coming year
- ROIC of 1.4% reflects management’s challenges in identifying attractive investment opportunities
Carnival’s stock price of $22.54 implies a valuation ratio of 9.6x forward P/E. Check out our free in-depth research report to learn more about why CCL doesn’t pass our bar.
Two Stocks to Watch:
Vita Coco (COCO)
Trailing 12-Month Free Cash Flow Margin: 17.6%
Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ: COCO) offers coconut water products that are a natural way to quench thirst.
Why Do We Love COCO?
- Products are selling at a rapid clip as its unit sales averaged an outstanding 15.2% growth rate over the past two years
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 42.9% outpaced its revenue gains
- Free cash flow margin jumped by 12.9 percentage points over the last year, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $56.84 per share, Vita Coco trades at 27.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Magnolia Oil & Gas (MGY)
Trailing 12-Month Free Cash Flow Margin: 36.9%
Operating over 600,000 net acres primarily in two distinct South Texas regions, Magnolia Oil & Gas (NYSE: MGY) drills and produces oil, natural gas, and natural gas liquids from South Texas formations.
Why Could MGY Be a Winner?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 15.2% annual sales growth over the last five years
- Attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 84.6%
- MGY is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Magnolia Oil & Gas is trading at $26.33 per share, or 8.9x 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
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum 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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
