1 Cash-Producing Stock with Solid Fundamentals and 2 to Be Wary Of

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 leverages its financial strength to beat its competitors and two that may face some trouble.

Two Stocks to Sell:

Paramount (PARA)

Trailing 12-Month Free Cash Flow Margin: 1.4%

Owner of Spongebob Squarepants and formerly known as ViacomCBS, Paramount Global (NASDAQ:PARA) is a major media conglomerate offering television, film production, and digital content across various global platforms.

Why Do We Avoid PARA?

1. Annual revenue declines of 2.3% over the last two years indicate problems with its market positioning
2. Incremental sales over the last five years were much less profitable as its earnings per share fell by 22.1% annually while its revenue grew
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $11.91 per share, Paramount trades at 8x forward P/E. If you’re considering PARA for your portfolio, see our FREE research report to learn more.

Beacon Roofing Supply (BECN)

Trailing 12-Month Free Cash Flow Margin: 3%

Established in 1928, Beacon Roofing Supply (NASDAQ:BECN) distributes residential and commercial roofing materials and complementary building products.

Why Does BECN Fall Short?

1. Estimated sales growth of 4.3% for the next 12 months implies demand will slow from its two-year trend
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. 5.4 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

Beacon Roofing Supply is trading at $124.22 per share, or 15.6x forward P/E. Dive into our free research report to see why there are better opportunities than BECN.

One Stock to Watch:

Globus Medical (GMED)

Trailing 12-Month Free Cash Flow Margin: 20.8%

With operations spanning 64 countries and a portfolio of over 10 new products launched in 2023 alone, Globus Medical (NYSE:GMED) develops and sells implantable devices, surgical instruments, and technology solutions for spine, orthopedic, and neurosurgical procedures.

Why Are We Positive On GMED?

1. Business is well-positioned no matter the global macroeconomic backdrop as its constant currency revenue growth averaged 61.4% over the past two years
2. Expected revenue growth of 18.5% for the next year suggests its market share will rise
3. Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 13.8% annually

Globus Medical’s stock price of $60.20 implies a valuation ratio of 17x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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