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. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two best left off your watchlist.
Two Stocks to Sell:
Xerox (XRX)
Trailing 12-Month Free Cash Flow Margin: 1.6%
Pioneering the modern office copier and inventing technologies like Ethernet and the laser printer, Xerox (NASDAQ: XRX) provides document management systems, printing technology, and workplace solutions to businesses of all sizes across the globe.
Why Do We Think XRX Will Underperform?
- Sales trends were unexciting over the last five years as its 1.5% annual growth was below the typical business services company
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital on unfavorable terms if market conditions deteriorate
Xerox is trading at $2.75 per share, or 9.7x forward P/E. Dive into our free research report to see why there are better opportunities than XRX.
LendingTree (TREE)
Trailing 12-Month Free Cash Flow Margin: 6.1%
Using the same comparison model that revolutionized travel booking, LendingTree (NASDAQ: TREE) operates an online platform that connects consumers with financial service providers across mortgages, personal loans, credit cards, insurance, and other financial products.
Why Do We Think Twice About TREE?
- Highly competitive market means it’s on the never-ending treadmill of sales and marketing spend
At $44.85 per share, LendingTree trades at 0.5x forward price-to-gross profit. Read our free research report to see why you should think twice about including TREE in your portfolio.
One Stock to Watch:
Matrix Service (MTRX)
Trailing 12-Month Free Cash Flow Margin: 5.9%
Founded in Oklahoma, Matrix Service (NASDAQ: MTRX) provides engineering, fabrication, construction, and maintenance services primarily to the energy and industrial markets.
Why Does MTRX Stand Out?
- Sales outlook for the upcoming 12 months calls for 12% growth, an acceleration from its two-year trend
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 58.2% over the last two years outstripped its revenue performance
- Free cash flow margin jumped by 8 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Matrix Service’s stock price of $12.47 implies a valuation ratio of 17.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum 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.
