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.
Luckily for you, we built StockStory to help you separate the good from the bad. That said, here is one cash-producing company that excels at turning cash into shareholder value and two that may face some trouble.
Two Stocks to Sell:
Movado (MOV)
Trailing 12-Month Free Cash Flow Margin: 5.4%
With its watches displayed in 20 museums around the world, Movado (NYSE: MOV) is a watchmaking company with a portfolio of watch brands and accessories.
Why Is MOV Risky?
- Lackluster 4.7% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Movado’s stock price of $22.66 implies a valuation ratio of 13.6x forward P/E. Check out our free in-depth research report to learn more about why MOV doesn’t pass our bar.
KB Home (KBH)
Trailing 12-Month Free Cash Flow Margin: 5.2%
The first homebuilder to be listed on the NYSE, KB Home (NYSE: KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
Why Should You Dump KBH?
- Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 21.6% declines over the past two years
- Earnings per share have dipped by 4.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $61.51 per share, KB Home trades at 13.6x forward P/E. If you’re considering KBH for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Seagate Technology (STX)
Trailing 12-Month Free Cash Flow Margin: 12.7%
The developer of the original 5.25inch hard disk drive, Seagate (NASDAQ: STX) is a leading producer of data storage solutions, including hard drives and Solid State Drives (SSDs) used in PCs and data centers.
Why Are We Fans of STX?
- Annual revenue growth of 18.5% over the last two years was superb and indicates its market share increased during this cycle
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
- Efficiency rose over the last five years as its Operating margin increased by 6.9 percentage points
Seagate Technology is trading at $304.18 per share, or 22.6x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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 9 Market-Beating Stocks. 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
