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 are two cash-producing companies that leverage their financial strength to beat the competition and one that may face some trouble.
One Stock to Sell:
PepsiCo (PEP)
Trailing 12-Month Free Cash Flow Margin: 10%
With a history that goes back more than a century, PepsiCo (NASDAQ:PEP) is a household name in food and beverages today and best known for its flagship soda.
Why Are We Wary of PEP?
- Declining unit sales over the past two years imply it may need to invest in product improvements to get back on track
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.2%
- Earnings growth over the last three years fell short of the peer group average as its EPS only increased by 5% annually
PepsiCo’s stock price of $125.94 implies a valuation ratio of 14.5x forward P/E. Check out our free in-depth research report to learn more about why PEP doesn’t pass our bar.
Two Stocks to Watch:
Powell (POWL)
Trailing 12-Month Free Cash Flow Margin: 21.1%
Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE:POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.
Why Are We Bullish on POWL?
- Market share has increased this cycle as its 20.5% annual revenue growth over the last five years was exceptional
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 22.2% outpaced its revenue gains
- Free cash flow margin expanded by 25.2 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Powell is trading at $196.50 per share, or 29.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
MYR Group (MYRG)
Trailing 12-Month Free Cash Flow Margin: 4.8%
Constructing electrical and phone lines in the American Midwest dating back to the 1890s, MYR Group (NASDAQ:MYRG) is a specialty contractor in the electrical construction industry.
Why Does MYRG Stand Out?
- Exciting sales outlook for the upcoming 12 months calls for 19.4% growth, an acceleration from its two-year trend
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- ROIC punches in at 16.2%, illustrating management’s expertise in identifying profitable investments, and its returns are growing as it capitalizes on even better market opportunities
At $304.99 per share, MYR Group trades at 22.9x forward P/E. Is now the time to initiate a position? 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.
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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.