1 Cash-Producing Stock with Exciting Potential and 2 We Avoid

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. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two that may struggle to keep up.

Two Stocks to Sell:

BlackLine (BL)

Trailing 12-Month Free Cash Flow Margin: 21.3%

Started in 2001 by software engineer Therese Tucker, one of the very few women founders who took their companies public, BlackLine (NASDAQ:BL) provides software for organizations to automate accounting and finance tasks.

Why Is BL Not Exciting?

1. Sales trends were unexciting over the last three years as its 12.5% annual growth was below the typical software company
2. Offerings struggled to generate meaningful interest as its average billings growth of 7.2% over the last year did not impress
3. Estimated sales growth of 8.2% for the next 12 months implies demand will slow from its three-year trend

BlackLine’s stock price of $51.21 implies a valuation ratio of 4.4x forward price-to-sales. To fully understand why you should be careful with BL, check out our full research report (it’s free).

Darden (DRI)

Trailing 12-Month Free Cash Flow Margin: 8.8%

Founded in 1968 as Red Lobster, Darden (NYSE:DRI) is a leading American restaurant company that owns and operates a portfolio of popular restaurant brands.

Why Are We Cautious About DRI?

1. Sizable revenue base leads to growth challenges as its 6% annual revenue increases over the last six years fell short of other restaurant companies
2. Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
3. Challenging supply chain dynamics and bad unit economics are reflected in its low gross margin of 21.5%

Darden is trading at $206.06 per share, or 19.2x forward P/E. Check out our free in-depth research report to learn more about why DRI doesn’t pass our bar.

One Stock to Watch:

AbbVie (ABBV)

Trailing 12-Month Free Cash Flow Margin: 31.3%

Born from a 2013 spinoff of Abbott Laboratories' pharmaceutical business, AbbVie (NYSE:ABBV) is a biopharmaceutical company that develops and markets medications for autoimmune diseases, cancer, neurological disorders, and other complex health conditions.

Why Are We Fans of ABBV?

1. Massive revenue base of $58.33 billion in a highly regulated sector makes the company difficult to replace, giving it meaningful negotiating power
2. Strong free cash flow margin of 36.6% enables it to reinvest or return capital consistently
3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures

At $204.70 per share, AbbVie trades at 15.5x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

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