A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are two cash-producing companies that reinvest wisely to drive long-term success and one that may face some trouble.
One Stock to Sell:
Jacobs Solutions (J)
Trailing 12-Month Free Cash Flow Margin: 9.5%
With a workforce of approximately 45,000 professionals tackling complex challenges from water scarcity to cybersecurity, Jacobs Solutions (NYSE:J) provides engineering, consulting, and technical services focused on infrastructure, sustainability, and advanced technology solutions.
Why Do We Think J Will Underperform?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.2% annually over the last five years
- Earnings per share have contracted by 6.1% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Underwhelming 8.2% return on capital reflects management’s difficulties in finding profitable growth opportunities
Jacobs Solutions is trading at $138.86 per share, or 17.2x forward P/E. Read our free research report to see why you should think twice about including J in your portfolio.
Two Stocks to Watch:
Monolithic Power Systems (MPWR)
Trailing 12-Month Free Cash Flow Margin: 19.2%
Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ:MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.
Why Is MPWR a Good Business?
- Annual revenue growth of 25.8% over the past five years was outstanding, reflecting market share gains this cycle
- Earnings per share grew by 27.5% annually over the last five years and trumped its peers
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Monolithic Power Systems’s stock price of $1,482 implies a valuation ratio of 44.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
e.l.f. Beauty (ELF)
Trailing 12-Month Free Cash Flow Margin: 15.9%
Short for "eyes, lips, face", e.l.f. Beauty (NYSE:ELF) is a developer of high-quality beauty products at accessible price points.
Why Is ELF Interesting?
- Remarkable 37.9% revenue growth over the last three years demonstrates its ability to capture significant market share
- Products command premium prices and lead to a best-in-class gross margin of 71.2%
- Free cash flow margin grew by 5.8 percentage points over the last year, giving the company more chips to play with
At $103.90 per share, e.l.f. Beauty trades at 34.2x forward P/E. Is now a good time to buy? See for yourself 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.