Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
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 leverages its financial strength to beat its competitors and two best left off your watchlist.
Two Stocks to Sell:
NVR (NVR)
Trailing 12-Month Free Cash Flow Margin: 13.3%
Known for its unique land acquisition strategy, NVR (NYSE: NVR) is a respected homebuilder and mortgage company in the United States.
Why Do We Think Twice About NVR?
- Backlog growth averaged a weak 1.5% over the past two years, suggesting it may need to tweak its product roadmap or go-to-market strategy
- Projected sales decline of 8.2% for the next 12 months points to a tough demand environment ahead
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 1.1% annually
NVR’s stock price of $7,139 implies a valuation ratio of 14.7x forward P/E. If you’re considering NVR for your portfolio, see our FREE research report to learn more.
Supernus Pharmaceuticals (SUPN)
Trailing 12-Month Free Cash Flow Margin: 24.5%
With a diverse portfolio of eight FDA-approved medications targeting neurological conditions, Supernus Pharmaceuticals (NASDAQ: SUPN) develops and markets treatments for central nervous system disorders including epilepsy, ADHD, Parkinson's disease, and migraine.
Why Do We Avoid SUPN?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Smaller revenue base of $668 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $33.27 per share, Supernus Pharmaceuticals trades at 16.2x forward P/E. Dive into our free research report to see why there are better opportunities than SUPN.
One Stock to Watch:
Xylem (XYL)
Trailing 12-Month Free Cash Flow Margin: 10.3%
Formed through a spinoff, Xylem (NYSE: XYL) manufactures and services engineered products across a wide variety of applications primarily in the water sector.
Why Are We Positive On XYL?
- Market share has increased this cycle as its 22.8% annual revenue growth over the last two years was exceptional
- Operating margin improvement of 3.2 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 19.5% annually
Xylem is trading at $127.63 per share, or 26.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
