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.
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 is one cash-producing company that excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
Universal Display (OLED)
Trailing 12-Month Free Cash Flow Margin: 25.2%
Serving major consumer electronics manufacturers, Universal Display (NASDAQ: OLED) is a provider of organic light emitting diode (OLED) technologies used in display and lighting applications.
Why Does OLED Fall Short?
- 4.3% annual revenue growth over the last two years was slower than its semiconductor peers
- Estimated sales growth of 4.4% for the next 12 months is soft and implies weaker demand
- Free cash flow margin shrank by 5.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $154.11 per share, Universal Display trades at 33.6x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why OLED doesn’t pass our bar.
Matson (MATX)
Trailing 12-Month Free Cash Flow Margin: 13.7%
Founded by a Swedish orphan, Matson (NYSE: MATX) is a provider of ocean transportation and logistics services.
Why Is MATX Not Exciting?
- Sales tumbled by 5.3% annually over the last two years, showing market trends are working against its favor during this cycle
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Eroding returns on capital suggest its historical profit centers are aging
Matson is trading at $114 per share, or 11.5x forward P/E. If you’re considering MATX for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Uber (UBER)
Trailing 12-Month Free Cash Flow Margin: 17.2%
Notoriously funded with $7.7 billion from the Softbank Vision Fund, Uber (NYSE: UBER) operates a platform of on-demand services such as ride-hailing, food delivery, and freight.
Why Do We Love UBER?
- Monthly Active Platform Consumers are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 66.6% over the last three years outstripped its revenue performance
- Free cash flow margin expanded by 17.7 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
Uber’s stock price of $89.90 implies a valuation ratio of 21.7x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
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