1 Cash-Producing Stock Worth Your Attention 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.

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:

Wyndham (WH)

Trailing 12-Month Free Cash Flow Margin: 20.5%

Established in 1981, Wyndham (NYSE:WH) is a global hotel franchising company with over 9,000 hotels across nearly 95 countries on six continents.

Why Is WH Risky?

1. Revenue per room has disappointed over the past two years due to weaker trends in its daily rates and occupancy levels
2. Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Wyndham’s stock price of $72.79 implies a valuation ratio of 15.3x forward P/E. To fully understand why you should be careful with WH, check out our full research report (it’s free).

ICU Medical (ICUI)

Trailing 12-Month Free Cash Flow Margin: 3.1%

Founded in 1984 and named for its initial focus on intensive care units, ICU Medical (NASDAQ:ICUI) develops and manufactures medical products for infusion therapy, vascular access, and vital care applications used in hospitals and other healthcare settings.

Why Do We Steer Clear of ICUI?

1. Sales trends were unexciting over the last two years as its 2.1% annual growth was below the typical healthcare company
2. Projected sales decline of 7.7% for the next 12 months points to a tough demand environment ahead
3. Free cash flow margin dropped by 11.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up

ICU Medical is trading at $149.66 per share, or 20.2x forward P/E. Read our free research report to see why you should think twice about including ICUI in your portfolio.

One Stock to Buy:

DXP (DXPE)

Trailing 12-Month Free Cash Flow Margin: 2.2%

Founded during the emergence of Big Oil in Texas, DXP (NASDAQ:DXPE) provides pumps, valves, and other industrial components.

Why Do We Love DXPE?

1. Annual revenue growth of 13% over the past five years was outstanding, reflecting market share gains this cycle
2. Operating margin expanded by 5.1 percentage points over the last five years as it scaled and became more efficient
3. Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue

At $130.04 per share, DXP trades at 21x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

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