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 is one cash-producing company that leverages its financial strength to beat its competitors and two that may struggle to keep up.
Two Stocks to Sell:
Elastic (ESTC)
Trailing 12-Month Free Cash Flow Margin: 20.2%
Built on the powerful open-source Elasticsearch technology that powers search functionality for thousands of websites worldwide, Elastic (NYSE: ESTC) provides a search and AI platform that helps organizations find insights from their data, monitor applications, and protect against security threats.
Why Do We Think Twice About ESTC?
- Estimated sales growth of 12.5% for the next 12 months implies demand will slow from its two-year trend
- Operating margin expanded by 7.7 percentage points over the last year as it scaled and became more efficient
- Free cash flow margin is forecasted to shrink by 2.4 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
Elastic is trading at $88.32 per share, or 5.3x forward price-to-sales. Check out our free in-depth research report to learn more about why ESTC doesn’t pass our bar.
Edgewell Personal Care (EPC)
Trailing 12-Month Free Cash Flow Margin: 1.9%
Boasting brands such as Banana Boat, Schick, and Skintimate, Edgewell Personal Care (NYSE: EPC) sells personal care products in the skin and sun care, shave, and feminine care categories.
Why Are We Out on EPC?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Earnings per share fell by 2.6% annually over the last three years while its revenue was flat, showing each sale was less profitable
- 4.9 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
Edgewell Personal Care’s stock price of $18.53 implies a valuation ratio of 6.4x forward P/E. To fully understand why you should be careful with EPC, check out our full research report (it’s free for active Edge members).
One Stock to Watch:
Laureate Education (LAUR)
Trailing 12-Month Free Cash Flow Margin: 15.6%
Founded in 1998 by Douglas L. Becker and based in Miami, Laureate Education (NASDAQ: LAUR) is a global network of higher education institutions.
Why Are We Fans of LAUR?
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 23.5%
- Free cash flow generation is better than most peers and allows it to explore new investment opportunities
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
At $30.69 per share, Laureate Education trades at 15.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Fresh US-China trade tensions just tanked stocks—but strong bank earnings are fueling a sharp rebound. Don’t miss the bounce.
Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. 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-micro-cap company Tecnoglass (+1,754% 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
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