2 Cash-Producing Stocks with Solid Fundamentals 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.

Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may face some trouble.

One Stock to Sell:

Oxford Industries (OXM)

Trailing 12-Month Free Cash Flow Margin: 1.7%

The parent company of Tommy Bahama, Oxford Industries (NYSE:OXM) is a lifestyle fashion conglomerate with brands that embody outdoor happiness.

Why Do We Avoid OXM?

1. Sales trends were unexciting over the last five years as its 12.6% annual growth was below the typical consumer discretionary company
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 3% for the last two years
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $38.22 per share, Oxford Industries trades at 16x forward P/E. Dive into our free research report to see why there are better opportunities than OXM.

Two Stocks to Watch:

Granite Construction (GVA)

Trailing 12-Month Free Cash Flow Margin: 7.5%

Having played a role in the construction of the Hoover Dam, Granite Construction (NYSE:GVA) is a provider of infrastructure solutions for roads, bridges, and other projects.

Why Are We Fans of GVA?

1. Annual revenue growth of 12.3% 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 38.9% over the last two years outstripped its revenue performance
3. Free cash flow margin jumped by 9.6 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends

Granite Construction’s stock price of $130.93 implies a valuation ratio of 21.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Verra Mobility (VRRM)

Trailing 12-Month Free Cash Flow Margin: 16.2%

Aiming to wrap technology and data around a historically manual and paper-based industry, Verra Mobility (NYSE:VRRM) is a leading provider of smart mobility technology to address tolls and violations, title and registration services, as well as safety and traffic enforcement.

Why Does VRRM Stand Out?

1. Market share has increased this cycle as its 18.4% annual revenue growth over the last five years was exceptional
2. Offerings are mission-critical for businesses and lead to a best-in-class gross margin of 61.8%
3. Earnings growth has trumped its peers over the last five years as its EPS has compounded at 20.4% annually

Verra Mobility is trading at $18.37 per share, or 13.8x 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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