1 Cash-Producing Stock with Exciting Potential and 2 Facing Headwinds

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.

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 leverages its financial strength to beat its competitors and two best left off your watchlist.

Two Stocks to Sell:

Figs (FIGS)

Trailing 12-Month Free Cash Flow Margin: 3.8%

Rising to fame via TikTok and founded in 2013 by Heather Hasson and Trina Spear, Figs (NYSE:FIGS) is a healthcare apparel company known for its stylish approach to medical attire and uniforms.

Why Is FIGS Risky?

1. Performance surrounding its active customers has lagged its peers
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 6.4% for the last two years
3. Returns on capital are growing as management invests in more worthwhile ventures

At $11.89 per share, Figs trades at 116.3x forward P/E. Read our free research report to see why you should think twice about including FIGS in your portfolio.

Archer-Daniels-Midland (ADM)

Trailing 12-Month Free Cash Flow Margin: 5.7%

Transforming crops from the world's most productive agricultural regions into everyday essentials, Archer-Daniels-Midland (NYSE:ADM) processes and transports agricultural commodities like grains and oilseeds while manufacturing ingredients for food, beverages, feed, and industrial applications.

Why Does ADM Worry Us?

1. Products aren't resonating with the market as its revenue declined by 5.5% annually over the last three years
2. Easily substituted products (and therefore stiff competition) result in an inferior gross margin of 6.2% that must be offset through higher volumes
3. Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term

Archer-Daniels-Midland is trading at $58.50 per share, or 15.6x forward P/E. If you’re considering ADM for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

Powell (POWL)

Trailing 12-Month Free Cash Flow Margin: 14%

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 25.7% over the last two years was superb and indicates its market share increased during this cycle
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 86.5% over the last two years outstripped its revenue performance
3. Free cash flow margin grew by 21.1 percentage points over the last five years, giving the company more chips to play with

Powell’s stock price of $357.50 implies a valuation ratio of 23.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

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