2 Cash-Producing Stocks on Our Watchlist and 1 We Ignore

A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here are two cash-producing companies that leverage their financial strength to beat the competition and one best left off your watchlist.

One Stock to Sell:

Nordson (NDSN)

Trailing 12-Month Free Cash Flow Margin: 19.5%

Founded in 1954, Nordson Corporation (NASDAQ:NDSN) manufactures dispensing equipment and industrial adhesives, sealants and coatings.

Why Does NDSN Worry Us?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. Earnings per share lagged its peers over the last two years as they only grew by 1.2% annually
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Nordson’s stock price of $223.17 implies a valuation ratio of 20.7x forward P/E. To fully understand why you should be careful with NDSN, check out our full research report (it’s free).

Two Stocks to Watch:

Ingersoll Rand (IR)

Trailing 12-Month Free Cash Flow Margin: 17.6%

Started with the invention of the steam drill, Ingersoll Rand (NYSE:IR) provides mission-critical air, gas, liquid, and solid flow creation solutions.

Why Do We Like IR?

1. Operating margin expanded by 6.7 percentage points over the last five years as it scaled and became more efficient
2. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
3. Strong free cash flow margin of 15.4% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety

Ingersoll Rand is trading at $80.06 per share, or 22.4x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

UL Solutions (ULS)

Trailing 12-Month Free Cash Flow Margin: 12.3%

Founded in 1894 as a response to the growing dangers of electricity in American homes and businesses, UL Solutions (NYSE:ULS) provides testing, inspection, and certification services that help companies ensure their products meet safety, security, and sustainability standards.

Why Is ULS Interesting?

1. Solid 7.2% annual revenue growth over the last two years indicates its offering’s solve complex business issues
2. Free cash flow margin jumped by 4.8 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures

At $66.75 per share, UL Solutions trades at 36.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

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