Businesses with strong free cash flow tend to be more adaptable and resilient. Some of these companies shine bright by using their cash wisely to strengthen their market positions.
Even among businesses with healthy cash flow, only a select few maximize its potential, and we’re here to pinpoint them. That said, here are three cash-producing companies that reinvest wisely to drive long-term success.
Amazon (AMZN)
Trailing 12-Month Free Cash Flow Margin: 2.1%
Founded by Jeff Bezos after quitting his stock-picking job at D.E. Shaw, Amazon (NASDAQ:AMZN) is the world’s largest online retailer and provider of cloud computing services.
Why Does AMZN Stand Out?
- Amazon revolutionized the way consumers shop. This isn’t the only tailwind to its impressive revenue growth, as its highly profitable AWS segment has also driven top-line momentum.
- The company's best-in-class revenue growth coupled with modest operating leverage on its past infrastructure investments has led to elite EPS growth over a multi-year period.
- Though dominant, Amazon's capital-intensive e-commerce business means its profitability is structurally lower than its pure-play tech peers. Can the company pull it up, or are we reaching a ceiling?
At $229.75 per share, Amazon trades at 30.8x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Elevance Health (ELV)
Trailing 12-Month Free Cash Flow Margin: 1.9%
Formerly known as Anthem until its 2022 rebranding, Elevance Health (NYSE:ELV) is one of America's largest health insurers, serving approximately 47 million medical members through its network-based managed care plans.
Why Are We Fans of ELV?
- 10.6% annual revenue growth over the last five years was better than the sector average, highlighting the value of its products and services
- Unparalleled scale of $194.8 billion in revenue enables it to spread administrative costs across a larger membership base
- ROIC punches in at 27.7%, illustrating management’s expertise in identifying profitable investments
Elevance Health is trading at $330.80 per share, or 12.1x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Alignment Healthcare (ALHC)
Trailing 12-Month Free Cash Flow Margin: 4.1%
Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ:ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.
Why Do We Love ALHC?
- Customer trends over the past two years show it’s maintaining a steady flow of new contracts that can potentially increase in value over time
- Earnings per share have massively outperformed its peers over the last four years, increasing by 30.1% annually
- Free cash flow profile has moved into positive territory over the last five years, indicating the company has achieved financial self-sustainability
Alignment Healthcare’s stock price of $19.57 implies a valuation ratio of 97x 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.
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