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. That said, here is one cash-producing company that reinvests wisely to drive long-term success and two that may struggle to keep up.
Two Stocks to Sell:
Adobe (ADBE)
Trailing 12-Month Free Cash Flow Margin: 41.4%
Originally named after Adobe Creek that ran behind co-founder John Warnock's house, Adobe (NASDAQ: ADBE) develops software products used for digital content creation, document management, and marketing solutions across desktop, mobile, and cloud platforms.
Why Are We Cautious About ADBE?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 12.6% underwhelmed
- Projected sales growth of 9.4% for the next 12 months suggests sluggish demand
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
At $349.57 per share, Adobe trades at 5.6x forward price-to-sales. Check out our free in-depth research report to learn more about why ADBE doesn’t pass our bar.
Verizon (VZ)
Trailing 12-Month Free Cash Flow Margin: 15.4%
Formed in 1984 as Bell Atlantic after the breakup of Bell System into seven companies, Verizon (NYSE: VZ) is a telecom giant providing a range of communications and internet services.
Why Should You Dump VZ?
- Customer growth was choppy over the past two years, suggesting that increasing competition is causing challenges in landing new contracts
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 1 percentage points over the next year
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Verizon is trading at $40.75 per share, or 8.6x forward P/E. To fully understand why you should be careful with VZ, check out our full research report (it’s free for active Edge members).
One Stock to Buy:
Hubbell (HUBB)
Trailing 12-Month Free Cash Flow Margin: 15%
A respected player in the electrical segment, Hubbell (NYSE: HUBB) manufactures electronic products for the construction, industrial, utility, and telecommunications markets.
Why Is HUBB a Top Pick?
- Operating margin expanded by 7.6 percentage points over the last five years as it scaled and became more efficient
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin jumped by 6.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Hubbell’s stock price of $444.11 implies a valuation ratio of 22.7x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check 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 244% over the last five years (as of June 30, 2025).
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-small-cap company Comfort Systems (+782% 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.
