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. That said, 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:
Pilgrim's Pride (PPC)
Trailing 12-Month Free Cash Flow Margin: 1.7%
Offering everything from pre-marinated to frozen chicken, Pilgrim’s Pride (NASDAQ: PPC) produces, processes, and distributes chicken products to retailers and food service customers.
Why Are We Bearish on PPC?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 2.6% over the last three years was below our standards for the consumer staples sector
- Sales are projected to remain flat over the next 12 months as demand decelerates from its three-year trend
- Commoditized products, bad unit economics, and high competition are reflected in its low gross margin of 11.7%
At $27.80 per share, Pilgrim's Pride trades at 13x forward P/E. Check out our free in-depth research report to learn more about why PPC doesn’t pass our bar.
Encore Capital Group (ECPG)
Trailing 12-Month Free Cash Flow Margin: 6.6%
Operating in the often misunderstood world of debt collection since 1999, Encore Capital Group (NASDAQ: ECPG) purchases portfolios of defaulted consumer debt at deep discounts and works with individuals to recover these obligations while helping them toward financial recovery.
Why Are We Cautious About ECPG?
- Annual revenue growth of 3.1% over the last five years was below our standards for the financials sector
- Low return on equity reflects management’s struggle to allocate funds effectively
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Encore Capital Group’s stock price of $103.16 implies a valuation ratio of 1.8x forward P/B. Read our free research report to see why you should think twice about including ECPG in your portfolio.
One stock to buy:
JFrog (FROG)
Trailing 12-Month Free Cash Flow Margin: 28.3%
Named after the amphibian that continuously evolves from egg to tadpole to adult, JFrog (NASDAQ: FROG) provides a platform that helps organizations securely create, store, manage, and distribute software packages across any system.
Why Are We Bullish on FROG?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 31.5% over the last year
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- FROG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
JFrog is trading at $95.75 per share, or 16x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks we like even more
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.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
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.
