Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.
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 excel at turning cash into shareholder value and one best left off your watchlist.
One Stock to Sell:
Installed Building Products (IBP)
Trailing 12-Month Free Cash Flow Margin: 9.4%
Founded in 1977, Installed Building Products (NYSE:IBP) is a company specializing in the installation of insulation, waterproofing, and other complementary building products for residential and commercial construction.
Why Does IBP Worry Us?
- 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
- Forecasted revenue decline of 3.1% for the upcoming 12 months implies demand will fall off a cliff
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 5.3% annually
Installed Building Products’s stock price of $265 implies a valuation ratio of 26.3x forward P/E. Dive into our free research report to see why there are better opportunities than IBP.
Two Stocks to Watch:
Arlo Technologies (ARLO)
Trailing 12-Month Free Cash Flow Margin: 11.2%
Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE:ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.
Why Is ARLO Interesting?
- Operating margin improvement of 13.1 percentage points over the last five years demonstrates its ability to scale efficiently
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 434% outpaced its revenue gains
- Free cash flow margin grew by 17.4 percentage points over the last five years, giving the company more chips to play with
Arlo Technologies is trading at $18.28 per share, or 26.9x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Armstrong World (AWI)
Trailing 12-Month Free Cash Flow Margin: 14%
Started as a two-man shop dating back to the 1860s, Armstrong (NYSE:AWI) provides ceiling and wall products to commercial and residential spaces.
Why Is AWI a Top Pick?
- Annual revenue growth of 11.1% over the last two years was superb and indicates its market share increased during this cycle
- Excellent operating margin of 24.7% highlights the efficiency of its business model, and it turbocharged its profits by achieving some fixed cost leverage
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
At $194.13 per share, Armstrong World trades at 26.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. 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-micro-cap company Tecnoglass (+1,754% 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
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