1 Cash-Producing Stock for Long-Term Investors and 2 We Find Risky

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.

Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two that may struggle to keep up.

Two Stocks to Sell:

Carter's (CRI)

Trailing 12-Month Free Cash Flow Margin: 3.2%

Rumored to sell more than 10 products for every child born in the United States, Carter's (NYSE:CRI) is an American designer and marketer of children's apparel.

Why Should You Dump CRI?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Low free cash flow margin of 6.5% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

Carter's is trading at $42.03 per share, or 14.8x forward P/E. Dive into our free research report to see why there are better opportunities than CRI.

Surgery Partners (SGRY)

Trailing 12-Month Free Cash Flow Margin: 5.9%

With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ:SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.

Why Does SGRY Give Us Pause?

1. Underwhelming unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 4.6% for the last five years
3. High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate

At $15.37 per share, Surgery Partners trades at 25.8x forward P/E. If you’re considering SGRY for your portfolio, see our FREE research report to learn more.

One Stock to Buy:

EXL (EXLS)

Trailing 12-Month Free Cash Flow Margin: 14.2%

Originally founded as an outsourcing company in 1999 before evolving into a technology-focused enterprise, EXL (NASDAQ:EXLS) provides data analytics and AI-powered digital operations solutions that help businesses transform their operations and make better decisions.

Why Should You Buy EXLS?

1. Market share has increased this cycle as its 16% annual revenue growth over the last five years was exceptional
2. Share repurchases over the last five years enabled its annual earnings per share growth of 24.4% to outpace its revenue gains
3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures

EXL’s stock price of $30.60 implies a valuation ratio of 14.8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.