2 Cash-Producing Stocks for Long-Term Investors and 1 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.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may struggle to keep up.

One Stock to Sell:

Novanta (NOVT)

Trailing 12-Month Free Cash Flow Margin: 4.9%

Originally a pioneer in the laser scanning industry during the late 1960s, Novanta (NASDAQ:NOVT) offers medicine and manufacturing technology to the medical, life sciences, and manufacturing industries.

Why Do We Think Twice About NOVT?

1. Muted 5.5% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
2. Incremental sales over the last two years were less profitable as its 4.2% annual earnings per share growth lagged its revenue gains
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.6 percentage points

Novanta is trading at $131.23 per share, or 38.4x forward P/E. Check out our free in-depth research report to learn more about why NOVT doesn’t pass our bar.

Two Stocks to Watch:

Cloudflare (NET)

Trailing 12-Month Free Cash Flow Margin: 12%

With a massive network spanning more than 310 cities in over 120 countries, Cloudflare (NYSE:NET) provides a global network that delivers security, performance and reliability services to protect websites, applications, and corporate networks.

Why Will NET Beat the Market?

1. Billings have averaged 33% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
2. Expected revenue growth of 28.8% for the next year suggests its market share will rise
3. User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs

Cloudflare’s stock price of $194.66 implies a valuation ratio of 24.2x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.

Ibotta (IBTA)

Trailing 12-Month Free Cash Flow Margin: 17.8%

Originally launched as a way to make grocery shopping more rewarding for budget-conscious consumers, Ibotta (NYSE:IBTA) is a mobile shopping app that allows consumers to earn cash back on everyday purchases by completing tasks and submitting receipts.

Why Are We Positive On IBTA?

1. Market share has increased this cycle as its 23.3% annual revenue growth over the last three years was exceptional
2. Adjusted operating profits and efficiency rose over the last four years as it benefited from some fixed cost leverage
3. Free cash flow margin grew by 47.8 percentage points over the last four years, giving the company more chips to play with

At $22.89 per share, Ibotta trades at 16.8x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.

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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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.