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. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one that may face some trouble.

One Stock to Sell:

Illinois Tool Works (ITW)

Trailing 12-Month Free Cash Flow Margin: 16.9%

Founded by Byron Smith, an investor who held over 100 patents, Illinois Tool Works (NYSE: ITW) manufactures engineered components and specialized equipment for numerous industries.

Why Is ITW Not Exciting?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Anticipated sales growth of 3.2% for the next year implies demand will be shaky
3. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 3.8% annually

Illinois Tool Works is trading at $273.62 per share, or 24.6x forward P/E. To fully understand why you should be careful with ITW, check out our full research report (it’s free).

Two Stocks to Watch:

Chipotle (CMG)

Trailing 12-Month Free Cash Flow Margin: 12.1%

Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE: CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.

Why Should CMG Be on Your Watchlist?

1. Fast expansion of new restaurants to reach markets with few or no locations is justified by its same-store sales growth
2. Same-store sales growth over the past two years shows it’s successfully drawing diners into its restaurants
3. Unparalleled revenue scale of $11.93 billion gives it advantageous pricing and terms with suppliers

Chipotle’s stock price of $34.78 implies a valuation ratio of 31x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Badger Meter (BMI)

Trailing 12-Month Free Cash Flow Margin: 18.5%

The developer of the world’s first frost-proof water meter in 1905, Badger Meter (NYSE: BMI) provides water control and measure equipment to various industries.

Why Are We Bullish on BMI?

1. Impressive 16.6% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. Incremental sales over the last two years have been highly profitable as its earnings per share increased by 23.6% annually, topping its revenue gains
3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its growing cash flow gives it even more resources to deploy

At $147.14 per share, Badger Meter trades at 29.3x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

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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 Kadant (+351% five-year return). Find your next big winner with StockStory today.