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.
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 best left off your watchlist.
Two Stocks to Sell:
Qualcomm (QCOM)
Trailing 12-Month Free Cash Flow Margin: 23.6%
Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm (NASDAQ:QCOM) is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.
Why Are We Hesitant About QCOM?
- Annual sales growth of 8.6% over the last two years lagged behind its semiconductor peers as its large revenue base made it difficult to generate incremental demand
- Forecasted revenue decline of 2.9% for the upcoming 12 months implies demand will fall off a cliff
- Efficiency has decreased over the last five years as its operating margin fell by 12.7 percentage points
At $177.50 per share, Qualcomm trades at 19.5x forward P/E. If you’re considering QCOM for your portfolio, see our FREE research report to learn more.
Alarm.com (ALRM)
Trailing 12-Month Free Cash Flow Margin: 17.7%
Processing over 325 billion data points annually from more than 150 million connected devices, Alarm.com (NASDAQ:ALRM) provides cloud-based platforms that enable residential and commercial property owners to remotely monitor and control their security, video, energy, and other connected devices.
Why Do We Pass on ALRM?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 8.7% underwhelmed
- Estimated sales growth of 4% for the next 12 months implies demand will slow from its two-year trend
- Static operating margin over the last year shows it couldn’t become more efficient
Alarm.com’s stock price of $53.50 implies a valuation ratio of 2.8x forward price-to-sales. Check out our free in-depth research report to learn more about why ALRM doesn’t pass our bar.
One Stock to Watch:
CoreCivic (CXW)
Trailing 12-Month Free Cash Flow Margin: 2.5%
Originally founded in 1983 as the first private prison company in the United States, CoreCivic (NYSE:CXW) operates correctional facilities, detention centers, and residential reentry programs for government agencies across the United States.
Why Are We Fans of CXW?
- Annual revenue growth of 12.4% over the past two years was outstanding, reflecting market share gains this cycle
- Projected revenue growth of 15.1% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
CoreCivic is trading at $31.88 per share, or 15.1x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.