A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may struggle to keep up.
One Stock to Sell:
Teradyne (TER)
Trailing 12-Month Free Cash Flow Margin: 14.6%
Sporting most major chip manufacturers as its customers, Teradyne (NASDAQ: TER) is a US-based supplier of automated test equipment for semiconductors as well as other technologies and devices.
Why Are We Cautious About TER?
- Sales trends were unexciting over the last five years as its 3.4% annual growth was below the typical semiconductor company
- Earnings per share lagged its peers over the last five years as they only grew by 4.1% annually
- Free cash flow margin shrank by 10.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $364.80 per share, Teradyne trades at 53.5x forward P/E. Read our free research report to see why you should think twice about including TER in your portfolio.
Two Stocks to Watch:
Dick's (DKS)
Trailing 12-Month Free Cash Flow Margin: 2.3%
Started as a hunting supply store, Dick’s Sporting Goods (NYSE: DKS) is a retailer that sells merchandise for traditional sports as well as for fitness and outdoor activities.
Why Are We Fans of DKS?
- Rapid rollout of new stores to capitalize on market opportunities makes sense given its strong same-store sales performance
- Locations open for at least a year are seeing increased demand as same-store sales have averaged 3.8% growth over the past two years
- Demand for the next 12 months is expected to accelerate above its three-year trend as Wall Street forecasts robust revenue growth of 29.6%
Dick's is trading at $214.91 per share, or 15.3x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Diamondback Energy (FANG)
Trailing 12-Month Free Cash Flow Margin: 30.7%
Sporting one of Wall Street's most memorable ticker symbols, Diamondback Energy (NASDAQ: FANG) drills for and produces oil and natural gas from underground rock formations in the Permian Basin of West Texas and New Mexico.
Why Should You Buy FANG?
- Annual revenue growth of 42.9% over the last ten years was superb and indicates its market share increased during this cycle
- Attractive asset base leads to wonderful unit economics and a best-in-class gross margin of 80.2%
- Strong free cash flow margin of 37% enables it to reinvest or return capital consistently
Diamondback Energy’s stock price of $200.44 implies a valuation ratio of 10.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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.
