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.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.
Two Stocks to Sell:
BJ's (BJ)
Trailing 12-Month Free Cash Flow Margin: 1.2%
Appealing to the budget-conscious individual shopping for a household, BJ’s Wholesale Club (NYSE: BJ) is a membership-only retail chain that sells groceries, appliances, electronics, and household items, often in bulk quantities.
Why Are We Cautious About BJ?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 18.5%
- Poor expense management has led to an operating margin of 3.9% that is below the industry average
At $94.41 per share, BJ's trades at 20.9x forward P/E. Dive into our free research report to see why there are better opportunities than BJ.
Amdocs (DOX)
Trailing 12-Month Free Cash Flow Margin: 14.2%
Powering the digital experiences of approximately 400 communications companies worldwide, Amdocs (NASDAQ: DOX) provides software and services that help telecommunications and media companies manage customer relationships, monetize services, and automate network operations.
Why Should You Sell DOX?
- Sales pipeline suggests its future revenue growth likely won’t meet our standards as its backlog hasn’t budged over the past two years
- Estimated sales growth of 3.3% for the next 12 months is soft and implies weaker demand
- Free cash flow margin shrank by 2.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Amdocs’s stock price of $79.78 implies a valuation ratio of 10.7x forward P/E. If you’re considering DOX for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Guidewire Software (GWRE)
Trailing 12-Month Free Cash Flow Margin: 21.3%
With its systems powering the operations of hundreds of insurance brands across 42 countries, Guidewire Software (NYSE: GWRE) provides a technology platform that helps property and casualty insurance companies manage their core operations, digital engagement, and analytics.
Why Are We Fans of GWRE?
- Average billings growth of 20.7% over the last year enhances its liquidity and shows there is steady demand for its products
- Software platform has product-market fit given the rapid recovery of its customer acquisition costs
- Free cash flow margin of 21.3% is higher than many in the industry, giving it breathing room and optionality
Guidewire Software is trading at $194.48 per share, or 11.5x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
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.
