A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are two cash-producing companies that reinvest wisely to drive long-term success and one best left off your watchlist.
One Stock to Sell:
Universal Technical Institute (UTI)
Trailing 12-Month Free Cash Flow Margin: 1.9%
Founded in 1965, Universal Technical Institute (NYSE: UTI) is a leading provider of technical training programs, specializing in automotive, diesel, collision repair, motorcycle, and marine technicians.
Why Are We Out on UTI?
- Sluggish trends in its new students suggest customers aren’t adopting its solutions as quickly as the company hoped
- Free cash flow margin is forecasted to shrink by 1.5 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Universal Technical Institute is trading at $39.64 per share, or 19.9x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including UTI in your portfolio.
Two Stocks to Watch:
Cardinal Health (CAH)
Trailing 12-Month Free Cash Flow Margin: 2.3%
Operating as a critical link in the healthcare supply chain since 1979, Cardinal Health (NYSE: CAH) distributes pharmaceuticals and manufactures medical products for hospitals, pharmacies, and healthcare providers across the global healthcare supply chain.
Why Do We Like CAH?
- Enormous revenue base of $244.7 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
- Sales outlook for the upcoming 12 months calls for 10.6% growth, an acceleration from its two-year trend
- Earnings growth has comfortably beaten the peer group average over the last five years as its EPS has compounded at 10.2% annually
At $213.63 per share, Cardinal Health trades at 19.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Omnicom Group (OMC)
Trailing 12-Month Free Cash Flow Margin: 16.1%
With a vast network of creative agencies that helped craft some of the most memorable ad campaigns in history, Omnicom Group (NYSE: OMC) is a strategic holding company that provides advertising, marketing, and communications services to many of the world's largest companies.
Why Does OMC Stand Out?
- 8.4% annual revenue growth over the last two years surpassed the sector average as its services resonated with customers
- Unparalleled revenue scale of $17.27 billion gives it an edge in distribution
- Free cash flow margin increased by 7.2 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Omnicom Group’s stock price of $75.75 implies a valuation ratio of 6.8x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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