2 Cash-Producing Stocks to Research Further and 1 We Brush Off

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 leverage their financial strength to beat the competition and one that may face some trouble.

One Stock to Sell:

Lockheed Martin (LMT)

Trailing 12-Month Free Cash Flow Margin: 7.5%

Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE:LMT) specializes in defense, space, homeland security, and information technology products.

Why Are We Out on LMT?

1. Annual sales growth of 2.6% over the last five years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
2. Incremental sales over the last five years were much less profitable as its earnings per share fell by 3.7% annually while its revenue grew
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $529.12 per share, Lockheed Martin trades at 17.6x forward P/E. Read our free research report to see why you should think twice about including LMT in your portfolio.

Two Stocks to Watch:

Arlo Technologies (ARLO)

Trailing 12-Month Free Cash Flow Margin: 11.5%

Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE:ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.

Why Does ARLO Stand Out?

1. 8.4% annual revenue growth over the last five years surpassed the sector average as its services resonated with customers
2. Additional sales over the last two years increased its profitability as the 54% annual growth in its earnings per share outpaced its revenue
3. Free cash flow margin expanded by 15.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends

Arlo Technologies is trading at $12.77 per share, or 17x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

JBT Marel (JBTM)

Trailing 12-Month Free Cash Flow Margin: 8.6%

Tracing back to its invention of the mechanical milk bottle filler in 1884, JBT Marel (NYSE:JBTM) designs, manufactures, and sells equipment used for food processing and aviation.

Why Is JBTM a Good Business?

1. Impressive 52.5% annual revenue growth over the last two years indicates it’s winning market share this cycle
2. Solid gross margin and unit economics free up capital for marketing and product development efforts
3. Earnings growth has trumped its peers over the last two years as its EPS has compounded at 27.1% annually

JBT Marel’s stock price of $138.99 implies a valuation ratio of 16.5x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

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