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 reinvests wisely to drive long-term success and two best left off your watchlist.
Two Stocks to Sell:
Envista (NVST)
Trailing 12-Month Free Cash Flow Margin: 8.5%
Uniting more than 30 trusted brands including Nobel Biocare, Ormco, and DEXIS under one corporate umbrella, Envista Holdings (NYSE: NVST) is a global dental products company that provides equipment, consumables, and specialized technologies for dental professionals.
Why Do We Avoid NVST?
- Annual revenue growth of 2.9% over the last two years was below our standards for the healthcare sector
- Negative returns on capital show that some of its growth strategies have backfired, and its decreasing returns suggest its historical profit centers are aging
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $30.66 per share, Envista trades at 20.8x forward P/E. If you’re considering NVST for your portfolio, see our FREE research report to learn more.
Jazz Pharmaceuticals (JAZZ)
Trailing 12-Month Free Cash Flow Margin: 32.1%
Originally founded in 2003 and now headquartered in Ireland following a 2012 tax inversion merger, Jazz Pharmaceuticals (NASDAQGS:JAZZ) develops and markets medicines for sleep disorders, epilepsy, and cancer, with a focus on treatments for patients with limited therapeutic options.
Why Do We Think Twice About JAZZ?
- Annual revenue growth of 4.7% over the last two years was below our standards for the healthcare sector
- Earnings per share fell by 8.7% annually over the last five years while its revenue grew, partly because it diluted shareholders
- 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Jazz Pharmaceuticals’s stock price of $165.68 implies a valuation ratio of 7.5x forward P/E. Check out our free in-depth research report to learn more about why JAZZ doesn’t pass our bar.
One Stock to Buy:
Zscaler (ZS)
Trailing 12-Month Free Cash Flow Margin: 29.9%
Pioneering the "zero trust" approach that has fundamentally changed enterprise network security, Zscaler (NASDAQ: ZS) provides a cloud-based security platform that connects users, devices, and applications securely without traditional network-based security hardware.
Why Are We Backing ZS?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 26.3% over the last year
- Forecasted revenue growth of 21.7% for the next 12 months indicates its momentum over the last two years is sustainable
- Robust free cash flow margin of 29.9% gives it many options for capital deployment
Zscaler is trading at $175.78 per share, or 7.8x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
