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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one best left off your watchlist.
One Stock to Sell:
Sensata Technologies (ST)
Trailing 12-Month Free Cash Flow Margin: 12.9%
Originally a temperature sensor control maker and a subsidiary of Texas Instruments for 60 years, Sensata Technology Holdings (NYSE: ST) is a leading supplier of analog sensors used in industrial and transportation applications, best known for its dominant position in the tire pressure monitoring systems in cars.
Why Do We Think ST Will Underperform?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.8% annually over the last two years
- Projected sales growth of 1.9% for the next 12 months suggests sluggish demand
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 30.2%
Sensata Technologies is trading at $35.93 per share, or 9.9x forward P/E. Dive into our free research report to see why there are better opportunities than ST.
Two Stocks to Buy:
TransDigm (TDG)
Trailing 12-Month Free Cash Flow Margin: 20.6%
Supplying parts for nearly all aircraft currently in service, TransDigm (NYSE: TDG) develops and manufactures components and systems for military and commercial aviation.
Why Is TDG a Top Pick?
- Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 12% over the past two years
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 20.2% annually, topping its revenue gains
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its growing cash flow gives it even more resources to deploy
TransDigm’s stock price of $1,379 implies a valuation ratio of 35.4x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
Axon (AXON)
Trailing 12-Month Free Cash Flow Margin: 6.1%
Providing body cameras and tasers for first responders, AXON (NASDAQ: AXON) develops technology solutions and weapons products for military, law enforcement, and civilians.
Why Will AXON Beat the Market?
- Products are seeing elevated demand as its unit sales averaged 26.3% growth over the past two years
- Operating margin improvement of 14.4 percentage points over the last five years demonstrates its ability to scale efficiently
- Earnings per share have massively outperformed its peers over the last two years, increasing by 35.2% annually
At $630.50 per share, Axon trades at 85.6x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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.
