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 that may face some trouble.
Two Stocks to Sell:
BJ's (BJ)
Trailing 12-Month Free Cash Flow Margin: 1.2%
Appealing to the budget-conscious individual shopping for a household, BJ’s Wholesale Club (NYSE: BJ) is a membership-only retail chain that sells groceries, appliances, electronics, and household items, often in bulk quantities.
Why Does BJ Fall Short?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
- Gross margin of 18.5% is below its competitors, leaving less money for marketing and promotions
- Operating margin of 3.9% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
BJ's is trading at $99.20 per share, or 21.7x forward P/E. If you’re considering BJ for your portfolio, see our FREE research report to learn more.
J. M. Smucker (SJM)
Trailing 12-Month Free Cash Flow Margin: 7.2%
Best known for its fruit jams and spreads, J.M Smucker (NYSE: SJM) is a packaged foods company whose products span from peanut butter and coffee to pet food.
Why Are We Out on SJM?
- Sales trends were unexciting over the last three years as its 2.4% annual growth was below the typical consumer staples company
- Efficiency has decreased over the last year as its operating margin fell by 22.2 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its falling returns suggest its earlier profit pools are drying up
At $109.57 per share, J. M. Smucker trades at 11.1x forward P/E. Read our free research report to see why you should think twice about including SJM in your portfolio.
One Stock to Buy:
Watts Water Technologies (WTS)
Trailing 12-Month Free Cash Flow Margin: 14.6%
Founded in 1874, Watts Water (NYSE: WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Will WTS Outperform?
- Annual revenue growth of 10.1% over the last five years beat the sector average and underscores the unique value of its offerings
- Share repurchases over the last five years enabled its annual earnings per share growth of 22.2% to outpace its revenue gains
- Free cash flow margin increased by 6.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
Watts Water Technologies’s stock price of $329.16 implies a valuation ratio of 28.2x forward P/E. Is now a good time to buy? Find out in our full 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 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 Exlservice (+354% five-year return). Find your next big winner with StockStory today.
