A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. 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:
Asure Software (ASUR)
Trailing 12-Month Free Cash Flow Margin: 3.1%
Operating in the often-overlooked smaller metropolitan markets where HR expertise can be scarce, Asure Software (NASDAQ: ASUR) provides cloud-based human capital management software and services that help small and medium-sized businesses manage payroll, taxes, time tracking, and HR compliance.
Why Is ASUR Risky?
- Sales trends were unexciting over the last two years as its 4.4% annual growth was well below the typical software company
- Offerings struggled to generate meaningful interest as its average billings growth of 7.1% over the last year did not impress
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 3.2 percentage points
At $8.46 per share, Asure Software trades at 1.5x forward price-to-sales. Check out our free in-depth research report to learn more about why ASUR doesn’t pass our bar.
Mettler-Toledo (MTD)
Trailing 12-Month Free Cash Flow Margin: 21.9%
With roots dating back to the precision balance innovations of Swiss engineer Erhard Mettler, Mettler-Toledo (NYSE: MTD) manufactures precision weighing instruments, analytical equipment, and product inspection systems used in laboratories, industrial settings, and food retail.
Why Are We Cautious About MTD?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Anticipated sales growth of 4.6% for the next year implies demand will be shaky
- Adjusted operating margin declined by 1.1 percentage points over the last two years as its sales cratered
Mettler-Toledo is trading at $1,438 per share, or 32.6x forward P/E. Dive into our free research report to see why there are better opportunities than MTD.
One Stock to Watch:
McDonald's (MCD)
Trailing 12-Month Free Cash Flow Margin: 26.5%
With nicknames spanning Mickey D's in the U.S. to Makku in Japan, McDonald’s (NYSE: MCD) is a fast-food behemoth known for its convenience and broken ice cream machines.
Why Does MCD Catch Our Eye?
- Bold push to open new restaurants demonstrates an ambitious strategy to establish itself in underpenetrated territories
- Asset-lite franchise model is reflected in its superior unit economics and a best-in-class gross margin of 57%
- Strong free cash flow margin of 27% enables it to reinvest or return capital consistently
McDonald’s stock price of $307.28 implies a valuation ratio of 24x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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