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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two that may struggle to keep up.
Two Stocks to Sell:
IBM (IBM)
Trailing 12-Month Free Cash Flow Margin: 20.4%
With a corporate history spanning over a century and once known for its iconic mainframe computers, IBM (NYSE:IBM) provides hybrid cloud computing platforms, AI solutions, consulting services, and enterprise infrastructure to help businesses modernize their operations.
Why Does IBM Worry Us?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 1.3% for the last five years
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 4.2% annually
IBM’s stock price of $302.90 implies a valuation ratio of 24.9x forward P/E. Dive into our free research report to see why there are better opportunities than IBM.
Amentum (AMTM)
Trailing 12-Month Free Cash Flow Margin: 3.6%
With operations spanning approximately 80 countries and a workforce of specialized engineers and technical experts, Amentum Holdings (NYSE:AMTM) provides advanced engineering and technology solutions to U.S. government agencies, allied governments, and commercial enterprises across defense, energy, and space sectors.
Why Do We Think Twice About AMTM?
- Annual sales growth of 2.4% over the last three years lagged behind its business services peers as its large revenue base made it difficult to generate incremental demand
- Estimated sales decline of 1.6% for the next 12 months implies a challenging demand environment
- Poor free cash flow margin of 2.3% for the last four years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Amentum is trading at $29.99 per share, or 12.2x forward P/E. If you’re considering AMTM for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
McDonald's (MCD)
Trailing 12-Month Free Cash Flow Margin: 28.1%
With nicknames spanning Mickey D's in the U.S. to Makku in Japan, McDonald’s (NYSE:MCD) is a fast-food behemoth known for its convenience and broken ice cream machines.
Why Do We Watch MCD?
- Aggressive expansion of new stores reflects an offensive push to quickly grow and sell in markets where it has few or no locations
- Attractive franchise model leads to wonderful unit economics and a best-in-class gross margin of 57%
- Robust free cash flow margin of 26.7% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy
At $315.50 per share, McDonald's trades at 24.4x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.