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. 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:
Zillow (ZG)
Trailing 12-Month Free Cash Flow Margin: 9.2%
Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ: ZG) is the leading U.S. online real estate marketplace.
Why Do We Steer Clear of ZG?
- Products and services have few die-hard fans as sales have declined by 6.7% annually over the last five years
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 5.8% annually
- Poor free cash flow margin of 11.6% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
At $34.07 per share, Zillow trades at 13.2x forward P/E. Dive into our free research report to see why there are better opportunities than ZG.
Herc (HRI)
Trailing 12-Month Free Cash Flow Margin: 8.2%
Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings (NYSE: HRI) provides equipment rental and related services to a wide range of industries.
Why Are We Cautious About HRI?
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 7 percentage points
- Issuance of new shares over the last two years caused its earnings per share to fall by 30.3% annually while its revenue grew
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Herc’s stock price of $169.74 implies a valuation ratio of 20.4x forward P/E. To fully understand why you should be careful with HRI, check out our full research report (it’s free).
One Stock to Buy:
CBIZ (CBZ)
Trailing 12-Month Free Cash Flow Margin: 9.9%
With over 120 offices across 33 states and a team of more than 6,700 professionals, CBIZ (NYSE: CBZ) provides accounting, tax, benefits, insurance brokerage, and advisory services to help small and mid-sized businesses manage their finances and operations.
Why Are We Bullish on CBZ?
- Annual revenue growth of 29.4% over the past two years was outstanding, reflecting market share gains this cycle
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 23.5% annually
- Free cash flow margin grew by 3.3 percentage points over the last five years, giving the company more chips to play with
CBIZ is trading at $54.43 per share, or 13.2x forward P/E. Is now the right time to buy? See for yourself in our comprehensive 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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
