1 Cash-Producing Stock to Consider Right Now and 2 We Find Risky

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. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two that may face some trouble.

Two Stocks to Sell:

Okta (OKTA)

Trailing 12-Month Free Cash Flow Margin: 31.5%

Named after the meteorological measurement for cloud cover, Okta (NASDAQ:OKTA) provides cloud-based identity management solutions that help organizations securely connect their employees, partners, and customers to the right applications and services.

Why Is OKTA Not Exciting?

1. Products, pricing, or go-to-market strategy may need some adjustments as its 10.2% average billings growth over the last year was weak
2. Estimated sales growth of 9.2% for the next 12 months implies demand will slow from its two-year trend
3. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 3.8 percentage points

Okta is trading at $74.23 per share, or 4.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than OKTA.

Getty Images (GETY)

Trailing 12-Month Free Cash Flow Margin: 2.4%

With a vast library of over 562 million visual assets documenting everything from breaking news to iconic historical moments, Getty Images (NYSE:GETY) is a global visual content marketplace that licenses photos, videos, illustrations, and music to businesses, media outlets, and creative professionals.

Why Does GETY Fall Short?

1. Annual revenue growth of 1.3% over the last two years was below our standards for the business services sector
2. Free cash flow margin dropped by 11.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Waning returns on capital imply its previous profit engines are losing steam

Getty Images’s stock price of $0.77 implies a valuation ratio of 10.6x forward P/E. Read our free research report to see why you should think twice about including GETY in your portfolio.

One Stock to Watch:

Uber (UBER)

Trailing 12-Month Free Cash Flow Margin: 18.8%

Notoriously funded with $7.7 billion from the Softbank Vision Fund, Uber (NYSE:UBER) operates a platform of on-demand services such as ride-hailing, food delivery, and freight.

Why Is UBER Interesting?

1. Monthly Active Platform Consumers have increased by an average of 15.1% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
2. Additional sales over the last three years increased its profitability as the 130% annual growth in its earnings per share outpaced its revenue
3. Free cash flow margin grew by 17.5 percentage points over the last few years, giving the company more chips to play with

At $74.57 per share, Uber trades at 14.4x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.

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