A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are two cash-producing companies that reinvest wisely to drive long-term success and one that may face some trouble.
One Stock to Sell:
Wynn Resorts (WYNN)
Trailing 12-Month Free Cash Flow Margin: 9.5%
Founded by the former Mirage Resorts CEO, Wynn Resorts (NASDAQ: WYNN) is a global developer and operator of high-end hotels and casinos, known for its luxurious properties and premium guest services.
Why Is WYNN Risky?
- Lackluster 2.3% annual revenue growth over the last two years indicates the company is losing ground to competitors
- Low free cash flow margin of 10.2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $102.74 per share, Wynn Resorts trades at 23.4x forward P/E. Read our free research report to see why you should think twice about including WYNN in your portfolio.
Two Stocks to Watch:
DigitalOcean (DOCN)
Trailing 12-Month Free Cash Flow Margin: 18%
Built for simplicity in a world of complex cloud solutions, DigitalOcean (NYSE: DOCN) provides a simplified cloud computing platform that enables developers and small businesses to quickly deploy and scale applications.
Why Is DOCN on Our Radar?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 17.6% over the last year
- Demand for the next 12 months is expected to accelerate above its two-year trend as Wall Street forecasts robust revenue growth of 30.7%
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
DigitalOcean is trading at $180.45 per share, or 15.7x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Armstrong World (AWI)
Trailing 12-Month Free Cash Flow Margin: 14.5%
Started as a two-man shop dating back to the 1860s, Armstrong (NYSE: AWI) provides ceiling and wall products to commercial and residential spaces.
Why Do We Love AWI?
- Annual revenue growth of 12.1% over the past two years was outstanding, reflecting market share gains this cycle
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 24.9%, and its operating leverage amplified its profits over the last five years
- Free cash flow margin increased by 5.2 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Armstrong World’s stock price of $153.79 implies a valuation ratio of 18.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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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.
