A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, 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:
Darden (DRI)
Trailing 12-month free cash flow margin: 7.9%
Founded in 1968 as Red Lobster, Darden (NYSE: DRI) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.
Why Are We Hesitant About DRI?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 6.5% for the last seven years
- Estimated sales growth of 3.9% for the next 12 months implies demand will slow from its seven-year trend
- Gross margin of 21.7% is below its competitors, leaving less money for marketing and promotions
At $219.66 per share, Darden trades at 18.9x forward P/E. Read our free research report to see why you should think twice about including DRI in your portfolio.
Two stocks to buy:
EMCOR (EME)
Trailing 12-month free cash flow margin: 7.5%
Through its network of over 70 subsidiaries, EMCOR (NYSE: EME) provides electrical, mechanical, and building construction and services
Why Will EME Beat the Market?
- Impressive 18% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Returns on capital are climbing as management makes more lucrative bets
EMCOR’s stock price of $672.02 implies a valuation ratio of 18.9x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
American Superconductor (AMSC)
Trailing 12-month free cash flow margin: 6.4%
Founded in 1987, American Superconductor (NASDAQ: AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
Why Is AMSC a Good Business?
- Annual revenue growth of 43.6% over the last two years was superb and indicates its market share increased during this cycle
- Free cash flow margin grew by 25.5 percentage points over the last five years, giving the company more chips to play with
- Historical investments are beginning to pay off as its returns on capital are growing
American Superconductor is trading at $27.19 per share, or 27.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks we like even more
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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 Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.
