2 Cash-Producing Stocks to Consider Right Now and 1 We Find Risky

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. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one best left off your watchlist.

One Stock to Sell:

Spectrum Brands (SPB)

Trailing 12-Month Free Cash Flow Margin: 5.9%

A leader in multiple consumer product categories, Spectrum Brands (NYSE:SPB) is a diversified company with a portfolio of trusted brands spanning home appliances, garden care, personal care, and pet care.

Why Should You Sell SPB?

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. Projected sales for the next 12 months are flat and suggest demand will be subdued
3. Underwhelming 0.9% return on capital reflects management’s difficulties in finding profitable growth opportunities

Spectrum Brands’s stock price of $59.74 implies a valuation ratio of 13.8x forward P/E. Dive into our free research report to see why there are better opportunities than SPB.

Two Stocks to Watch:

Vertiv (VRT)

Trailing 12-Month Free Cash Flow Margin: 14.1%

Formerly part of Emerson Electric, Vertiv (NYSE:VRT) manufactures and services infrastructure technology products for data centers and communication networks.

Why Are We Bullish on VRT?

1. Core business can prosper without any help from acquisitions as its organic revenue growth averaged 21% over the past two years
2. Free cash flow margin increased by 7.9 percentage points over the last five years, giving the company more capital to invest or return to shareholders
3. Improving returns on capital reflect management’s ability to monetize investments

Vertiv is trading at $161.40 per share, or 30.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.

Vertex Pharmaceuticals (VRTX)

Trailing 12-Month Free Cash Flow Margin: 28.5%

Founded in 1989 with a mission to create medicines that treat the underlying causes of disease rather than just symptoms, Vertex Pharmaceuticals (NASDAQ:VRTX) develops and markets transformative medicines for serious diseases, with a focus on cystic fibrosis, sickle cell disease, and pain management.

Why Are We Fans of VRTX?

1. Solid 14.4% annual revenue growth over the last five years indicates its offering’s solve complex business issues
2. Strong free cash flow margin of 25.4% enables it to reinvest or return capital consistently, and its growing cash flow gives it even more resources to deploy
3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures

At $456.19 per share, Vertex Pharmaceuticals trades at 22.3x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

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