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. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two that may struggle to keep up.
Two Stocks to Sell:
Bentley Systems (BSY)
Trailing 12-Month Free Cash Flow Margin: 34.6%
Pioneering the concept of "digital twins" for infrastructure projects long before it became an industry buzzword, Bentley Systems (NASDAQ: BSY) provides software solutions that help engineers design, build, and operate infrastructure projects across sectors including roads, bridges, utilities, mining, and industrial facilities.
Why Are We Hesitant About BSY?
- Average ARR growth of 12.3% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
- Operating margin improvement of 1.8 percentage points over the last year demonstrates its ability to scale efficiently
- Projected 3.1 percentage point decline in its free cash flow margin next year reflects the company’s plans to increase its investments to defend its market position
Bentley Systems’s stock price of $37.84 implies a valuation ratio of 7.4x forward price-to-sales. Check out our free in-depth research report to learn more about why BSY doesn’t pass our bar.
Paramount (PSKY)
Trailing 12-Month Free Cash Flow Margin: 1.2%
Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ: PSKY) is a major media conglomerate offering television, film production, and digital content across various global platforms.
Why Do We Steer Clear of PSKY?
- Annual sales growth of 2.7% over the last five years lagged behind its consumer discretionary peers as its large revenue base made it difficult to generate incremental demand
- Free cash flow margin is forecasted to shrink by 2.7 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $9.21 per share, Paramount trades at 11.4x forward P/E. Read our free research report to see why you should think twice about including PSKY in your portfolio.
One Stock to Buy:
KLA Corporation (KLAC)
Trailing 12-Month Free Cash Flow Margin: 34.4%
Formed by the 1997 merger of the two leading semiconductor yield management companies, KLA Corporation (NASDAQ: KLAC) is the leading supplier of equipment used to measure and inspect semiconductor chips.
Why Are We Backing KLAC?
- Annual revenue growth of 16% over the last five years was superb and indicates its market share increased during this cycle
- Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 60.7%
- KLAC is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its growing cash flow gives it even more resources to deploy
KLA Corporation is trading at $1,503 per share, or 35.9x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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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.
