A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are two cash-producing companies that leverage their financial strength to beat the competition and one best left off your watchlist.
One Stock to Sell:
Honeywell (HON)
Trailing 12-Month Free Cash Flow Margin: 12.8%
Originally founded in 1906 as a thermostat company, Honeywell (NASDAQ: HON) is a multinational conglomerate known for its aerospace systems, building technologies, performance materials, and safety and productivity solutions.
Why Are We Out on HON?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Free cash flow margin shrank by 2.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Honeywell’s stock price of $218.73 implies a valuation ratio of 21.2x forward P/E. To fully understand why you should be careful with HON, check out our full research report (it’s free).
Two Stocks to Buy:
Monolithic Power Systems (MPWR)
Trailing 12-Month Free Cash Flow Margin: 26.6%
Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ: MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.
Why Do We Love MPWR?
- Impressive 27.9% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Earnings growth has trumped its peers over the last five years as its EPS has compounded at 29.1% annually
- ROIC punches in at 45.5%, illustrating management’s expertise in identifying profitable investments
At $1,035 per share, Monolithic Power Systems trades at 50.9x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Wingstop (WING)
Trailing 12-Month Free Cash Flow Margin: 9.2%
The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ: WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.
Why Is WING a Good Business?
- Customers are lining up to eat at its restaurants as the company’s same-store sales growth averaged 11.9% over the past two years
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 25.7%
- Strong free cash flow margin of 15.9% enables it to reinvest or return capital consistently
Wingstop is trading at $276.49 per share, or 61.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Check out the high-quality names we’ve flagged in our Top 6 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
