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.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one best left off your watchlist.
One Stock to Sell:
Steven Madden (SHOO)
Trailing 12-Month Free Cash Flow Margin: 7.6%
As seen in the infamous Wolf of Wall Street movie, Steven Madden (NASDAQ: SHOO) is a fashion brand famous for its trendy and innovative footwear, appealing to a young and style-conscious audience.
Why Do We Pass on SHOO?
- Lackluster 13.4% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 3 percentage points over the next year
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Steven Madden’s stock price of $45.14 implies a valuation ratio of 18.8x forward P/E. Dive into our free research report to see why there are better opportunities than SHOO.
Two Stocks to Watch:
Parker-Hannifin (PH)
Trailing 12-Month Free Cash Flow Margin: 18.2%
Founded in 1917, Parker Hannifin (NYSE: PH) is a manufacturer of motion and control systems for a wide variety of mobile, industrial and aerospace markets.
Why Should PH Be on Your Watchlist?
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 19.1%, and its rise over the last five years was fueled by some leverage on its fixed costs
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- 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
Parker-Hannifin is trading at $972.15 per share, or 27.3x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
CACI (CACI)
Trailing 12-Month Free Cash Flow Margin: 8.2%
Founded to commercialize SIMSCRIPT, CACI International (NYSE: CACI) offers defense, intelligence, and IT solutions to support national security and government transformation efforts.
Why Are We Positive on CACI?
- Impressive 11.8% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Share repurchases over the last two years enabled its annual earnings per share growth of 19% to outpace its revenue gains
At $608.78 per share, CACI trades at 18.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
