1 Cash-Producing Stock with Exciting Potential and 2 We Brush Off

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 is one cash-producing company that reinvests wisely to drive long-term success and two best left off your watchlist.

Two Stocks to Sell:

Napco (NSSC)

Trailing 12-Month Free Cash Flow Margin: 28.3%

Protecting everything from schools to government facilities since 1969, Napco Security Technologies (NASDAQ:NSSC) manufactures electronic security devices, access control systems, and communication services for intrusion and fire alarm systems.

Why Does NSSC Fall Short?

1. Sales trends were unexciting over the last two years as its 3.4% annual growth was below the typical business services company
2. Subscale operations are evident in its revenue base of $181.6 million, meaning it has fewer distribution channels than its larger rivals
3. Estimated sales growth of 3.1% for the next 12 months is soft and implies weaker demand

Napco’s stock price of $42.70 implies a valuation ratio of 35.8x forward P/E. Dive into our free research report to see why there are better opportunities than NSSC.

Gates Industrial Corporation (GTES)

Trailing 12-Month Free Cash Flow Margin: 9.9%

Helping create one of the most memorable moments for the iconic “Jurassic Park” film, Gates (NYSE:GTES) offers power transmission and fluid transfer equipment for various industries.

Why Does GTES Give Us Pause?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 5%
3. Below-average returns on capital indicate management struggled to find compelling investment opportunities

Gates Industrial Corporation is trading at $25.74 per share, or 16.9x forward P/E. Read our free research report to see why you should think twice about including GTES in your portfolio.

One Stock to Buy:

Powell (POWL)

Trailing 12-Month Free Cash Flow Margin: 7.5%

Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE:POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.

Why Is POWL a Good Business?

1. Annual revenue growth of 28.7% over the past two years was outstanding, reflecting market share gains this cycle
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 124% over the last two years outstripped its revenue performance
3. Free cash flow margin grew by 12.8 percentage points over the last five years, giving the company more chips to play with

At $303.60 per share, Powell trades at 20.7x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .

Stocks We Like Even More

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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