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 is one cash-producing company that leverages its financial strength to beat its competitors and two best left off your watchlist.

Two Stocks to Sell:

onsemi (ON)

Trailing 12-Month Free Cash Flow Margin: 20.8%

Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi (NASDAQ: ON) is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers.

Why Does ON Worry Us?

1. Annual sales declines of 10.6% for the past two years show its products and services struggled to connect with the market during this cycle
2. Forecasted revenue decline of 10.2% for the upcoming 12 months implies demand will fall even further
3. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 13.4% for the last two years

At $44 per share, onsemi trades at 16.4x forward P/E. To fully understand why you should be careful with ON, check out our full research report (it’s free).

Warner Bros. Discovery (WBD)

Trailing 12-Month Free Cash Flow Margin: 11.3%

Formed from the merger of WarnerMedia and Discovery, Warner Bros. Discovery (NASDAQ: WBD) is a multinational media and entertainment company, offering television networks, streaming services, and film and television production.

Why Should You Sell WBD?

1. Annual revenue declines of 4.9% over the last two years indicate problems with its market positioning
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 17% annually
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Warner Bros. Discovery’s stock price of $9.10 implies a valuation ratio of 166.4x forward P/E. Dive into our free research report to see why there are better opportunities than WBD.

One Stock to Buy:

Costco (COST)

Trailing 12-Month Free Cash Flow Margin: 2.6%

Designed to be a one-stop shop for the suburban consumer, Costco (NASDAQ: COST) is a membership-only retail chain that sells groceries, apparel, toys, and household items, often in bulk quantities.

Why Will COST Beat the Market?

1. Locations open for at least a year are seeing increased demand as same-store sales have averaged 4.4% growth over the past two years
2. Enormous revenue base of $264.1 billion compensates for its low gross margin and provides significant leverage in supplier negotiations
3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures

Costco is trading at $1,018 per share, or 54x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

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.