While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are two cash-producing companies that reinvest wisely to drive long-term success and one best left off your watchlist.
One Stock to Sell:
Ralph Lauren (RL)
Trailing 12-Month Free Cash Flow Margin: 8.9%
Originally founded as a necktie company, Ralph Lauren (NYSE: RL) is an iconic American fashion brand known for its classic and sophisticated style.
Why Are We Out on RL?
- Constant currency revenue growth has disappointed over the past two years and shows demand was soft
- Subpar operating margin of 13.7% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 11.9% for the last two years
At $362.49 per share, Ralph Lauren trades at 21.7x forward P/E. Dive into our free research report to see why there are better opportunities than RL.
Two Stocks to Watch:
TJX (TJX)
Trailing 12-Month Free Cash Flow Margin: 8.1%
Initially based on a strategy of buying excess inventory from manufacturers or other retailers, TJX (NYSE: TJX) is an off-price retailer that sells brand-name apparel and other goods at prices much lower than department stores.
Why Do We Like TJX?
- Same-store sales growth averaged 3.9% over the past two years, showing it’s bringing new and repeat shoppers into its stores
- Massive revenue base of $60.37 billion makes up for its weaker gross margin and makes it a household name that influences purchasing decisions
- Industry-leading 28.2% return on capital demonstrates management’s skill in finding high-return investments, and its returns are climbing as it finds even more attractive growth opportunities
TJX’s stock price of $161.22 implies a valuation ratio of 31.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Mastercard (MA)
Trailing 12-Month Free Cash Flow Margin: 50.1%
Recognizable by its iconic "Priceless" advertising campaign that has run in over 120 countries, Mastercard (NYSE: MA) operates a global payments network that connects consumers, financial institutions, merchants, and businesses, enabling electronic transactions and providing payment solutions.
Why Is MA a Good Business?
- Annual revenue growth of 16.5% over the past five years was outstanding, reflecting market share gains this cycle
- Performance over the past five years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Stellar return on equity showcases management’s ability to surface highly profitable business ventures
Mastercard is trading at $515.94 per share, or 26.3x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 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.
