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:
Teradata (TDC)
Trailing 12-Month Free Cash Flow Margin: 15.4%
Part of point-of-sale and ATM company NCR from 1991 to 2007, Teradata (NYSE: TDC) offers a software-as-service platform that helps organizations manage and analyze their data across multiple storages.
Why Is TDC Risky?
- Products, pricing, or go-to-market strategy need some adjustments as its billings have averaged 3.4% declines over the last year
- Sales are projected to tank by 3.2% over the next 12 months as its demand continues evaporating
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 60.2%
Teradata is trading at $22.65 per share, or 1.3x forward price-to-sales. To fully understand why you should be careful with TDC, check out our full research report (it’s free).
Jabil (JBL)
Trailing 12-Month Free Cash Flow Margin: 4.8%
With manufacturing facilities spanning the globe from China to Mexico to the United States, Jabil (NYSE: JBL) provides electronics design, manufacturing, and supply chain solutions to companies across various industries, from healthcare to automotive to cloud computing.
Why Does JBL Fall Short?
- Annual sales declines of 11.6% for the past two years show its products and services struggled to connect with the market during this cycle
- Flat earnings per share over the last two years lagged its peers
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3.1% for the last five years
Jabil’s stock price of $151.89 implies a valuation ratio of 16.1x forward P/E. Read our free research report to see why you should think twice about including JBL in your portfolio.
One Stock to Watch:
Cigna (CI)
Trailing 12-Month Free Cash Flow Margin: 2.4%
With roots dating back to 1792 and serving millions of customers across the globe, The Cigna Group (NYSE: CI) provides healthcare services through its Evernorth Health Services and Cigna Healthcare segments, offering pharmacy benefits, specialty care, and medical plans.
Why Are We Positive On CI?
- Annual revenue growth of 18.1% over the past two years was outstanding, reflecting market share gains this cycle
- Enormous revenue base of $255.3 billion gives it leverage over plan holders and advantageous reimbursement terms with healthcare providers
- Earnings per share grew by 9.1% annually over the last five years, comfortably beating the peer group average
At $333.11 per share, Cigna trades at 10.9x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
