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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one that may face some trouble.
One Stock to Sell:
Darden (DRI)
Trailing 12-Month Free Cash Flow Margin: 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?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 5.7% over the last six years was below our standards for the restaurant sector
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- Gross margin of 21.3% reflects the bad unit economics inherent in most restaurant businesses
Darden is trading at $219.63 per share, or 21.6x forward P/E. Read our free research report to see why you should think twice about including DRI in your portfolio.
Two Stocks to Watch:
Reddit (RDDT)
Trailing 12-Month Free Cash Flow Margin: 21.6%
Founded in 2005 by two University of Virginia roommates, Reddit (NYSE: RDDT) facilitates user-generated content across niche communities (called subreddits) that discuss anything from stocks to dating and memes.
Why Do We Love RDDT?
- Domestic Daily Active Visitors are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Earnings per share grew by 31.6% annually over the last three years and trumped its peers
- Free cash flow margin jumped by 38.9 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Reddit’s stock price of $118.04 implies a valuation ratio of 38x forward EV/EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
Lantheus (LNTH)
Trailing 12-Month Free Cash Flow Margin: 30.8%
Pioneering the "Find, Fight and Follow" approach to disease management, Lantheus Holdings (NASDAQGM:LNTH) develops and commercializes radiopharmaceuticals and other imaging agents that help healthcare professionals detect, diagnose, and treat diseases.
Why Are We Fans of LNTH?
- Annual revenue growth of 34.3% over the last five years was superb and indicates its market share increased during this cycle
- Free cash flow margin grew by 29.5 percentage points over the last five years, giving the company more chips to play with
- Returns on capital are climbing as management makes more lucrative bets
At $83.07 per share, Lantheus trades at 11.6x 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
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.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free.
