1 Cash-Producing Stock Worth Your Attention and 2 Facing Headwinds

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

Luckily for you, we built StockStory to help you separate the good from the bad. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two that may face some trouble.

Two Stocks to Sell:

Kulicke and Soffa (KLIC)

Trailing 12-Month Free Cash Flow Margin: 11.1%

Headquartered in Singapore, Kulicke & Soffa (NASDAQ: KLIC) is a provider of production equipment and tools used to assemble semiconductor devices

Why Do We Avoid KLIC?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.6% annually over the last five years
2. Operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs
3. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable

Kulicke and Soffa’s stock price of $66.26 implies a valuation ratio of 35.9x forward P/E. Read our free research report to see why you should think twice about including KLIC in your portfolio.

Dollar General (DG)

Trailing 12-Month Free Cash Flow Margin: 5.6%

Appealing to the budget-conscious consumer, Dollar General (NYSE:DG) is a discount retailer that sells a wide range of household essentials, groceries, apparel/beauty products, and seasonal merchandise.

Why Do We Think Twice About DG?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Gross margin of 30% is an output of its commoditized inventory
3. Earnings per share have dipped by 17.4% annually over the past three years, which is concerning because stock prices follow EPS over the long term

At $144.57 per share, Dollar General trades at 21.4x forward P/E. If you’re considering DG for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

DexCom (DXCM)

Trailing 12-Month Free Cash Flow Margin: 23.5%

Founded in 1999 and receiving its first FDA approval in 2006, DexCom (NASDAQ:DXCM) develops and sells continuous glucose monitoring systems that allow people with diabetes to track their blood sugar levels without repeated finger pricks.

Why Will DXCM Beat the Market?

1. Core business can prosper without any help from acquisitions as its organic revenue growth averaged 14.4% over the past two years
2. Earnings growth has trumped its peers over the last five years as its EPS has compounded at 17.5% annually
3. Free cash flow margin jumped by 17.5 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends

DexCom is trading at $70.11 per share, or 29.5x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

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