Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two that may face some trouble.
Two Stocks to Sell:
H&R Block (HRB)
Trailing 12-Month Free Cash Flow Margin: 19.5%
Founded in 1955 by brothers Henry W. Bloch and Richard A. Bloch, H&R Block (NYSE: HRB) is a tax preparation company offering professional tax assistance and financial solutions to individuals and small businesses.
Why Is HRB Risky?
- Annual sales declines of 2.1% for the past five years show its products and services struggled to connect with the market
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 8.8% annually
- Eroding returns on capital suggest its historical profit centers are aging
H&R Block is trading at $36.44 per share, or 1.2x forward price-to-sales. Read our free research report to see why you should think twice about including HRB in your portfolio.
SolarEdge (SEDG)
Trailing 12-Month Free Cash Flow Margin: 6.1%
Established in 2006, SolarEdge (NASDAQ: SEDG) creates advanced systems to improve the efficiency of solar panels.
Why Are We Out on SEDG?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.3% annually over the last five years
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
SolarEdge’s stock price of $57.71 implies a valuation ratio of 101.1x forward P/E. Check out our free in-depth research report to learn more about why SEDG doesn’t pass our bar.
One Stock to Watch:
Gilead Sciences (GILD)
Trailing 12-Month Free Cash Flow Margin: 34.4%
From its groundbreaking work in developing the first single-tablet regimens for HIV treatment, Gilead Sciences (NASDAQ: GILD) develops and markets innovative medicines for life-threatening diseases including HIV, viral hepatitis, COVID-19, and cancer.
Why Are We Fans of GILD?
- Revenue base of $29.73 billion gives it economies of scale and some negotiating power
- Adjusted operating margin improvement of 19.7 percentage points over the last two years demonstrates its ability to scale efficiently
- Strong free cash flow margin of 33% enables it to reinvest or return capital consistently
At $127.50 per share, Gilead Sciences trades at 5.1x forward price-to-sales. Is now the time to initiate a position? 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.
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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.
