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.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here is one cash-producing company that excels at turning cash into shareholder value and two best left off your watchlist.
Two Stocks to Sell:
BlackLine (BL)
Trailing 12-Month Free Cash Flow Margin: 20.4%
Born from the vision to eliminate tedious manual spreadsheet work for accountants, BlackLine (NASDAQ:BL) provides cloud-based software that automates and streamlines financial close, intercompany accounting, and invoice-to-cash processes for accounting departments.
Why Do We Pass on BL?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 7.3% underwhelmed
- Competitive market means the company must spend more on sales and marketing to stand out even if the return on investment is low
- Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses
At $27.98 per share, BlackLine trades at 2.4x forward price-to-sales. Check out our free in-depth research report to learn more about why BL doesn’t pass our bar.
Array (ARRY)
Trailing 12-Month Free Cash Flow Margin: 11.4%
Going public in October 2020, Array (NASDAQ:ARRY) is a global manufacturer of ground-mounting tracking systems for utility and distributed generation solar energy projects.
Why Do We Avoid ARRY?
- Sales trends were unexciting over the last two years as its 3.7% annual growth was below the typical industrials company
- Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 3.1% annually
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Array’s stock price of $4.01 implies a valuation ratio of 5.3x forward P/E. If you’re considering ARRY for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Zurn Elkay (ZWS)
Trailing 12-Month Free Cash Flow Margin: 21.2%
Claiming to have saved more than 30 billion gallons of water, Zurn Elkay (NYSE:ZWS) provides water management solutions to various industries.
Why Does ZWS Stand Out?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 9.6% annual sales growth over the last five years
- Operating margin expanded by 6.3 percentage points over the last five years as it scaled and became more efficient
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its rising cash conversion increases its margin of safety
Zurn Elkay is trading at $46.91 per share, or 23.7x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.