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. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two best left off your watchlist.
Two Stocks to Sell:
Pediatrix Medical Group (MD)
Trailing 12-Month Free Cash Flow Margin: 14.2%
With a network of approximately 2,620 affiliated physicians caring for some of the most vulnerable patients, Pediatrix Medical Group (NYSE: MD) provides specialized physician services focused on neonatal, maternal-fetal, pediatric cardiology and other pediatric subspecialty care across 37 states.
Why Are We Hesitant About MD?
- Lagging comparable store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Estimated sales growth of 1.1% for the next 12 months is soft and implies weaker demand
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Pediatrix Medical Group’s stock price of $22.16 implies a valuation ratio of 10.5x forward P/E. Read our free research report to see why you should think twice about including MD in your portfolio.
Elanco (ELAN)
Trailing 12-Month Free Cash Flow Margin: 8%
Originally established as a division of pharmaceutical giant Eli Lilly before becoming independent in 2018, Elanco Animal Health (NYSE: ELAN) develops and sells medications, vaccines, and other health products for pets and farm animals across more than 90 countries.
Why Is ELAN Not Exciting?
- 2.5% annual revenue growth over the last two years was slower than its healthcare peers
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Negative returns on capital show management lost money while trying to expand the business
At $22.61 per share, Elanco trades at 22.6x forward P/E. To fully understand why you should be careful with ELAN, check out our full research report (it’s free for active Edge members).
One Stock to Watch:
Coherent (COHR)
Trailing 12-Month Free Cash Flow Margin: 1.2%
Created through the 2022 rebranding of II-VI Incorporated, a company with roots dating back to 1971, Coherent (NYSE: COHR) develops and manufactures advanced materials, lasers, and optical components for applications ranging from telecommunications to industrial manufacturing.
Why Does COHR Catch Our Eye?
- Annual revenue growth of 16.9% over the last five years was superb and indicates its market share increased during this cycle
- Projected revenue growth of 14.9% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings per share grew by 38.4% annually over the last two years and trumped its peers
Coherent is trading at $173.55 per share, or 33x forward P/E. Is now a good time to buy? Find out in our full 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 5 Growth Stocks for this month. 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.
