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. Keeping that in mind, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.
Two Stocks to Sell:
Mattel (MAT)
Trailing 12-Month Free Cash Flow Margin: 9.3%
Known for the creation of iconic toys such as Barbie and Hotwheels, Mattel (NASDAQ:MAT) is a global children's entertainment company specializing in the design and production of consumer products.
Why Is MAT Risky?
- Sales trends were unexciting over the last five years as its 3.3% annual growth was below the typical consumer discretionary company
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 11.1% for the last two years
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Mattel’s stock price of $20.54 implies a valuation ratio of 12.3x forward P/E. Dive into our free research report to see why there are better opportunities than MAT.
Packaging Corporation of America (PKG)
Trailing 12-Month Free Cash Flow Margin: 8.3%
Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection.
Why Is PKG Not Exciting?
- Muted 5.7% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 22.8%
- Waning returns on capital imply its previous profit engines are losing steam
At $196.81 per share, Packaging Corporation of America trades at 18.5x forward P/E. To fully understand why you should be careful with PKG, check out our full research report (it’s free for active Edge members).
One Stock to Buy:
Cal-Maine (CALM)
Trailing 12-Month Free Cash Flow Margin: 27.6%
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ:CALM) produces, packages, and distributes eggs.
Why Do We Love CALM?
- Remarkable 27.7% revenue growth over the last three years demonstrates its ability to capture significant market share
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 66.4% annually, topping its revenue gains
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business
Cal-Maine is trading at $85.33 per share, or 12.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% 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
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