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 reinvest wisely to drive long-term success and one that may face some trouble.
One Stock to Sell:
Packaging Corporation of America (PKG)
Trailing 12-Month Free Cash Flow Margin: 7.2%
Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection.
Why Are We Hesitant About PKG?
- 3.7% annual revenue growth over the last two years was slower than its industrials peers
- Gross margin of 22.7% reflects its high production costs
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 1.1% annually
Packaging Corporation of America is trading at $196.35 per share, or 18.2x forward P/E. If you’re considering PKG for your portfolio, see our FREE research report to learn more.
Two Stocks to Watch:
Intuit (INTU)
Trailing 12-Month Free Cash Flow Margin: 33.6%
Created in 1983 when founder Scott Cook watched his wife struggle to reconcile the family's checkbook, Intuit provides tax and accounting software for small and medium-sized businesses.
Why Does INTU Stand Out?
- Winning new contracts that can potentially increase in value as its billings growth has averaged 15.8% over the last year
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- INTU is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Intuit’s stock price of $749.99 implies a valuation ratio of 10.4x forward price-to-sales. Is now a good time to buy? See for yourself in our full research report, it’s free.
Merck (MRK)
Trailing 12-Month Free Cash Flow Margin: 23.1%
With roots dating back to 1891 and a portfolio that includes the blockbuster cancer immunotherapy Keytruda, Merck (NYSE: MRK) develops and sells prescription medicines, vaccines, and animal health products across oncology, infectious diseases, cardiovascular, and other therapeutic areas.
Why Do We Love MRK?
- Unparalleled scale of $63.62 billion in revenue gives it negotiating leverage and staying power in an industry with high barriers to entry
- Adjusted operating profits and efficiency rose over the last two years as it benefited from some fixed cost leverage
- Free cash flow margin grew by 10.7 percentage points over the last five years, giving the company more chips to play with
At $80.77 per share, Merck trades at 8.7x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. 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-small-cap company Exlservice (+354% 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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