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.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.
Two Stocks to Sell:
eXp World (EXPI)
Trailing 12-Month Free Cash Flow Margin: 2.3%
Founded in 2009, eXp World (NASDAQ: EXPI) is a real estate company known for its virtual, cloud-based approach to real estate brokerage.
Why Do We Steer Clear of EXPI?
- Annual revenue growth of 5.7% over the last two years was below our standards for the consumer discretionary sector
- Poor free cash flow margin of 3.1% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
At $5.98 per share, eXp World trades at 23.8x forward P/E. Check out our free in-depth research report to learn more about why EXPI doesn’t pass our bar.
Cognex (CGNX)
Trailing 12-Month Free Cash Flow Margin: 23.8%
Founded in 1981 when computer vision was in its infancy, Cognex (NASDAQ: CGNX) develops machine vision systems and software that help manufacturers and logistics companies automate quality inspection and tracking of products.
Why Are We Cautious About CGNX?
- 4.2% annual revenue growth over the last five years was slower than its business services peers
- Earnings per share fell by 1.3% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Waning returns on capital imply its previous profit engines are losing steam
Cognex is trading at $47.24 per share, or 39.5x forward P/E. To fully understand why you should be careful with CGNX, check out our full research report (it’s free).
One Stock to Buy:
DXP (DXPE)
Trailing 12-Month Free Cash Flow Margin: 2.7%
Founded during the emergence of Big Oil in Texas, DXP (NASDAQ: DXPE) provides pumps, valves, and other industrial components.
Why Is DXPE a Top Pick?
- Market share has increased this cycle as its 14.9% annual revenue growth over the last five years was exceptional
- Operating margin expanded by 5.2 percentage points over the last five years as it scaled and became more efficient
- Share buybacks catapulted its annual earnings per share growth to 47.4%, which outperformed its revenue gains over the last five years
DXP’s stock price of $136.59 implies a valuation ratio of 22.4x forward P/E. 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
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
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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.
