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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are two cash-producing companies that reinvest wisely to drive long-term success and one best left off your watchlist.
One Stock to Sell:
Best Buy (BBY)
Trailing 12-Month Free Cash Flow Margin: 3.6%
With humble beginnings as a stereo equipment seller, Best Buy (NYSE: BBY) now sells a broad selection of consumer electronics, appliances, and home office products.
Why Are We Out on BBY?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Gross margin of 22.5% is below its competitors, leaving less money for marketing and promotions
- Operating margin of 3% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
At $64.64 per share, Best Buy trades at 10.1x forward P/E. Check out our free in-depth research report to learn more about why BBY doesn’t pass our bar.
Two Stocks to Watch:
Doximity (DOCS)
Trailing 12-Month Free Cash Flow Margin: 48.2%
With over 80% of U.S. physicians as members of its digital community, Doximity (NYSE: DOCS) operates a digital platform that enables physicians and other healthcare professionals to collaborate, stay current with medical news, manage their careers, and conduct virtual patient visits.
Why Do We Like DOCS?
- Billings have averaged 17.1% growth over the last year, showing it’s securing new contracts that could potentially increase in value over time
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Strong free cash flow margin of 48.2% enables it to reinvest or return capital consistently
Doximity is trading at $25.27 per share, or 7.4x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
Grid Dynamics (GDYN)
Trailing 12-Month Free Cash Flow Margin: 6.7%
With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ: GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.
Why Could GDYN Be a Winner?
- Annual revenue growth of 29.1% over the past five years was outstanding, reflecting market share gains this cycle
- Earnings growth has trumped its peers over the last five years as its EPS has compounded at 22.2% annually
- Historical investments are beginning to pay off as its returns on capital are growing
Grid Dynamics’s stock price of $6.91 implies a valuation ratio of 16.4x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
