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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two best left off your watchlist.
Two Stocks to Sell:
Qualys (QLYS)
Trailing 12-Month Free Cash Flow Margin: 42.4%
Originally developed to address the growing complexity of IT security in the cloud era, Qualys (NASDAQ: QLYS) provides a cloud-based platform that helps organizations identify, manage, and protect their IT assets from cyber threats across on-premises, cloud, and mobile environments.
Why Are We Cautious About QLYS?
- Average billings growth of 9.1% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
- Estimated sales growth of 7.7% for the next 12 months implies demand will slow from its two-year trend
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
Qualys’s stock price of $107.95 implies a valuation ratio of 5.4x forward price-to-sales. Check out our free in-depth research report to learn more about why QLYS doesn’t pass our bar.
Fortive (FTV)
Trailing 12-Month Free Cash Flow Margin: 22.5%
Taking its name from the Latin root of "strong", Fortive (NYSE: FTV) manufactures products and develops industrial software for numerous industries.
Why Are We Out on FTV?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.4% annually over the last five years
- Flat earnings per share over the last five years underperformed the sector average
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its decreasing returns suggest its historical profit centers are aging
Fortive is trading at $61.74 per share, or 20.1x forward P/E. Dive into our free research report to see why there are better opportunities than FTV.
One Stock to Buy:
Fair Isaac Corporation (FICO)
Trailing 12-Month Free Cash Flow Margin: 38.4%
Creator of the three-digit number that can determine whether you get a mortgage or credit card, Fair Isaac Corporation (NYSE: FICO) develops analytics software and the widely used FICO Score, which is the standard measure of consumer credit risk in the United States.
Why Will FICO Beat the Market?
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 29.3% exceeded its revenue gains over the last two years
- FICO is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its growing cash flow gives it even more resources to deploy
- Improving returns on capital reflect management’s ability to monetize investments
At $1,074 per share, Fair Isaac Corporation trades at 22.4x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
