1 Cash-Producing Stock with Exciting Potential and 2 to Be Wary Of

Yahoo

27-05-2025

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.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.
Trailing 12-Month Free Cash Flow Margin: 29.3%
Boasting major consumer staples and pharmaceutical companies as clients, Manhattan Associates (NASDAQ:MANH) offers a software-as-service platform that helps customers manage their supply chains.
Why Do We Pass on MANH?
Average billings growth of 3.6% over the last year was subpar, suggesting it struggled to push its software and might have to lower prices to stimulate demand
Estimated sales growth of 1.9% for the next 12 months implies demand will slow from its three-year trend
Gross margin of 55.6% is way below its competitors, leaving less money to invest in areas like marketing and R&D
At $185.23 per share, Manhattan Associates trades at 10.6x forward price-to-sales. Check out our free in-depth research report to learn more about why MANH doesn't pass our bar.
Trailing 12-Month Free Cash Flow Margin: 15.5%
Originally founded as Carlisle Tire and Rubber Company, Carlisle Companies (NYSE:CSL) is a multi-industry product manufacturer focusing on construction materials and weatherproofing technologies.
Why Does CSL 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
Anticipated sales growth of 5.1% for the next year implies demand will be shaky
Earnings growth underperformed the sector average over the last two years as its EPS grew by just 4.8% annually
Carlisle's stock price of $386.84 implies a valuation ratio of 17.1x forward P/E. If you're considering CSL for your portfolio, see our FREE research report to learn more.
Trailing 12-Month Free Cash Flow Margin: 25.7%
Short for microcomputer software, Microsoft (NASDAQ:MSFT) is the largest software vendor in the world with its Windows operating system, Office suite, and cloud computing services.
Why Are We Backing MSFT?
Microsoft is one of the great brands not just in tech but all of business. It produces mission-critical software and bundles it together, resulting in cream-of-the-crop gross margins.
The company's elite unit economics lead to robust profit margins that improve over time. This speaks to the scale advantages and operating efficiency across its diverse portfolio, which spans everything from Office and Azure to Minecraft.
Microsoft has a virtuous cycle of returns. Its dominant market position enables it to generate strong free cash flow, and it reinvests these funds into promising ventures that further strengthen its competitive moat.
Microsoft is trading at $450.33 per share, or 31.7x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it's free.
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.
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