1 Cash-Producing Stock to Target This Week and 2 We Avoid

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.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, 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: 37.6%

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 Does QLYS Worry Us?

1. Average ARR growth of 9.6% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
2. Estimated sales growth of 6.8% for the next 12 months implies demand will slow from its three-year trend
3. Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 3.9 percentage points over the next year

At $135.81 per share, Qualys trades at 7.3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than QLYS.

MGM Resorts (MGM)

Trailing 12-Month Free Cash Flow Margin: 7.5%

Operating several properties on the Las Vegas Strip, MGM Resorts (NYSE:MGM) is a global hospitality and entertainment company known for its resorts and casinos.

Why Should You Dump MGM?

1. Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 7.8% over the last two years was below our standards for the consumer discretionary sector
2. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
3. High net-debt-to-EBITDA ratio could force the company to raise capital at unfavorable terms if market conditions deteriorate

MGM Resorts is trading at $39.69 per share, or 16.8x forward P/E. Check out our free in-depth research report to learn more about why MGM doesn’t pass our bar.

One Stock to Watch:

Tractor Supply (TSCO)

Trailing 12-Month Free Cash Flow Margin: 5.4%

Started as a mail-order tractor parts business, Tractor Supply (NASDAQ:TSCO) is a retailer of general goods such as agricultural supplies, hardware, and pet food for the rural consumer.

Why Do We Watch TSCO?

1. Fast expansion of new stores indicates an aggressive approach to attacking untapped market opportunities
2. Projected revenue growth of 6.7% for the next 12 months suggests its momentum from the last six years will persist
3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures

Tractor Supply’s stock price of $61.85 implies a valuation ratio of 28x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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