2 Cash-Producing Stocks for Long-Term Investors and 1 to Steer Clear Of

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.

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:

Mohawk Industries (MHK)

Trailing 12-Month Free Cash Flow Margin: 4.7%

Established in 1878, Mohawk Industries (NYSE:MHK) is a leading producer of floor-covering products for both residential and commercial applications.

Why Do We Pass on MHK?

1. Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
2. ROIC of 3.5% reflects management’s challenges in identifying attractive investment opportunities, and its decreasing returns suggest its historical profit centers are aging

Mohawk Industries’s stock price of $98.45 implies a valuation ratio of 9.6x forward P/E. Read our free research report to see why you should think twice about including MHK in your portfolio.

Two Stocks to Watch:

Netflix (NFLX)

Trailing 12-Month Free Cash Flow Margin: 18.5%

Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.

Why Are We Backing NFLX?

1. Global Streaming Paid Memberships have increased by an average of 13.5% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
2. Healthy EBITDA margin of 27% shows it’s a well-run company with efficient processes, and it turbocharged its profits by achieving some fixed cost leverage
3. Free cash flow margin grew by 18.6 percentage points over the last few years, giving the company more chips to play with

Netflix is trading at $1,222 per share, or 37.7x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.

ADP (ADP)

Trailing 12-Month Free Cash Flow Margin: 21%

Processing one out of every six paychecks in the United States, ADP (NASDAQ:ADP) provides cloud-based human capital management solutions that help businesses manage payroll, benefits, talent acquisition, and HR administration.

Why Should ADP Be on Your Watchlist?

1. Massive revenue base of $20.2 billion makes it a well-known name that influences purchasing decisions
2. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business
3. Returns on capital are growing as management capitalizes on its market opportunities

At $306.25 per share, ADP trades at 28.9x 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

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.