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. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one best left off your watchlist.
One Stock to Sell:
Academy Sports (ASO)
Trailing 12-Month Free Cash Flow Margin: 3.2%
Founded in 1938 as a tire shop before expanding into fishing equipment, Academy Sports & Outdoor (NASDAQ:ASO) sells a broad selection of sporting goods but is still known for its outdoor activity merchandise.
Why Are We Hesitant About ASO?
- Products have few die-hard fans as sales have declined by 2.4% annually over the last three years
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Free cash flow margin shrank by 3.9 percentage points over the last year, suggesting the company is consuming more capital to stay competitive
Academy Sports is trading at $52.25 per share, or 8.4x forward P/E. Dive into our free research report to see why there are better opportunities than ASO.
Two Stocks to Watch:
Granite Construction (GVA)
Trailing 12-Month Free Cash Flow Margin: 8.2%
Having played a role in the construction of the Hoover Dam, Granite Construction (NYSE:GVA) is a provider of infrastructure solutions for roads, bridges, and other projects.
Why Does GVA Stand Out?
- Annual revenue growth of 12.2% over the past two years was outstanding, reflecting market share gains this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 43% outpaced its revenue gains
- Free cash flow margin grew by 5.3 percentage points over the last five years, giving the company more chips to play with
Granite Construction’s stock price of $117.52 implies a valuation ratio of 19.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Watts Water Technologies (WTS)
Trailing 12-Month Free Cash Flow Margin: 14.6%
Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Do We Love WTS?
- 9.3% annual revenue growth over the last five years surpassed the sector average as its offerings resonated with customers
- Offerings are difficult to replicate at scale and lead to a best-in-class gross margin of 45.9%
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 21.8% exceeded its revenue gains over the last five years
At $283.27 per share, Watts Water Technologies trades at 25.3x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.