A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here are two cash-producing companies that reinvest wisely to drive long-term success and one that may struggle to keep up.
One Stock to Sell:
Callaway Golf Company (CALY)
Trailing 12-Month Free Cash Flow Margin: 21.9%
Formed between the merger of Callaway and Topgolf, Callaway Golf Company (NYSE:CALY) sells golf equipment and operates technology-driven golf entertainment venues.
Why Are We Out on CALY?
- Annual revenue declines of 2.5% over the last five years indicate problems with its market positioning
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 11.5 percentage points over the next year
- Stagnant returns on capital show management has failed to improve the company’s business quality
At $13.88 per share, Callaway Golf Company trades at 16.1x forward P/E. Dive into our free research report to see why there are better opportunities than CALY.
Two Stocks to Watch:
Airbnb (ABNB)
Trailing 12-Month Free Cash Flow Margin: 36.7%
Founded by Brian Chesky and Joe Gebbia in their San Francisco apartment, Airbnb (NASDAQ:ABNB) is the world’s largest online marketplace for lodging, primarily homestays.
Why Is ABNB a Good Business?
- Nights and Experiences Booked have grown by 9.3% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Disciplined cost controls and effective management resulted in a strong two-year EBITDA margin of 35.6%, and its rise over the last few years was fueled by some leverage on its fixed costs
- ABNB is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Airbnb’s stock price of $161.05 implies a valuation ratio of 16.1x forward EV/EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
Arlo Technologies (ARLO)
Trailing 12-Month Free Cash Flow Margin: 11.4%
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 Could ARLO Be a Winner?
- 7.6% annual revenue growth over the last five years surpassed the sector average as its services resonated with customers
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 55.3% outpaced its revenue gains
- Free cash flow margin expanded by 17.6 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Arlo Technologies is trading at $11.96 per share, or 14.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.