While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
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 leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
Lockheed Martin (LMT)
Trailing 12-Month Free Cash Flow Margin: 7.5%
Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE: LMT) specializes in defense, space, homeland security, and information technology products.
Why Are We Out on LMT?
- Annual sales growth of 2.6% over the last five years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 3.7% annually while its revenue grew
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $529.12 per share, Lockheed Martin trades at 17.6x forward P/E. Read our free research report to see why you should think twice about including LMT in your portfolio.
Two Stocks to Watch:
Arlo Technologies (ARLO)
Trailing 12-Month Free Cash Flow Margin: 11.5%
Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE: ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.
Why Does ARLO Stand Out?
- 8.4% annual revenue growth over the last five years surpassed the sector average as its services resonated with customers
- Additional sales over the last two years increased its profitability as the 54% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin expanded by 15.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Arlo Technologies is trading at $12.77 per share, or 17x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
JBT Marel (JBTM)
Trailing 12-Month Free Cash Flow Margin: 8.6%
Tracing back to its invention of the mechanical milk bottle filler in 1884, JBT Marel (NYSE: JBTM) designs, manufactures, and sells equipment used for food processing and aviation.
Why Is JBTM a Good Business?
- Impressive 52.5% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Solid gross margin and unit economics free up capital for marketing and product development efforts
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 27.1% annually
JBT Marel’s stock price of $138.99 implies a valuation ratio of 16.5x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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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.
