1 Cash-Producing Stock on Our Watchlist and 2 That Underwhelm

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 is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.

Two Stocks to Sell:

Wayfair (W)

Trailing 12-Month Free Cash Flow Margin: 2.3%

Founded in 2002 by Niraj Shah, Wayfair (NYSE:W) is a leading online retailer of mass-market home goods in the US, UK, Canada, and Germany.

Why Does W Worry Us?

1. Intense competition is diverting traffic from its platform as its active customers fell by 1.8% annually
2. Estimated sales growth of 5.2% for the next 12 months is soft and implies weaker demand
3. High servicing costs result in an inferior gross margin of 30.2% that must be offset through higher volumes

At $100.28 per share, Wayfair trades at 19.8x forward EV/EBITDA. To fully understand why you should be careful with W, check out our full research report (it’s free for active Edge members).

Dell (DELL)

Trailing 12-Month Free Cash Flow Margin: 4.3%

Founded by Michael Dell in his University of Texas dorm room in 1984 with just $1,000, Dell Technologies (NYSE:DELL) provides hardware, software, and services that help organizations build their IT infrastructure, manage cloud environments, and enable digital transformation.

Why Are We Wary of DELL?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 3.7% over the last five years was below our standards for the business services sector
2. Underwhelming ARR growth of 3.6% suggests the company faced challenges in acquiring and retaining long-term customers
3. 6.5 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

Dell is trading at $127.33 per share, or 11.2x forward P/E. Dive into our free research report to see why there are better opportunities than DELL.

One Stock to Watch:

Carlisle (CSL)

Trailing 12-Month Free Cash Flow Margin: 19.2%

Originally founded as Carlisle Tire and Rubber Company, Carlisle Companies (NYSE:CSL) is a multi-industry product manufacturer focusing on construction materials and weatherproofing technologies.

Why Are We Fans of CSL?

1. Healthy operating margin of 19.5% shows it’s a well-run company with efficient processes, and its profits increased over the last five years as it scaled
2. Share repurchases over the last five years enabled its annual earnings per share growth of 24.7% to outpace its revenue gains
3. Robust free cash flow margin of 15.3% gives it many options for capital deployment, and its growing cash flow gives it even more resources to deploy

Carlisle’s stock price of $326.88 implies a valuation ratio of 16.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.

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