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.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. That said, here is one cash-producing company that reinvests wisely to drive long-term success and two best left off your watchlist.
Two Stocks to Sell:
DocuSign (DOCU)
Trailing 12-Month Free Cash Flow Margin: 31.3%
Creating the digital equivalent of "sign on the dotted line" for over a billion users worldwide, DocuSign (NASDAQ: DOCU) provides an agreement management platform that enables businesses to electronically prepare, sign, and manage documents and contracts.
Why Does DOCU Worry Us?
- Average ARR growth of 8.4% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
- Anticipated sales growth of 6.7% for the next year implies demand will be shaky
- Operating margin improvement of 3.5 percentage points over the last year demonstrates its ability to scale efficiently
At $68 per share, DocuSign trades at 4.2x forward price-to-sales. Read our free research report to see why you should think twice about including DOCU in your portfolio.
G-III (GIII)
Trailing 12-Month Free Cash Flow Margin: 12.2%
Founded as a small leather goods business, G-III (NASDAQ: GIII) is a fashion and apparel conglomerate with a diverse portfolio of brands.
Why Should You Sell GIII?
- Sales trends were unexciting over the last five years as its 5.8% annual growth was below the typical consumer discretionary company
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 10.9% for the last two years
- ROIC hasn’t moved, making investors question whether its recent investments can increase profitability
G-III’s stock price of $32.08 implies a valuation ratio of 11.6x forward P/E. If you’re considering GIII for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Moody's (MCO)
Trailing 12-Month Free Cash Flow Margin: 32%
Founded in 1900 during America's railroad boom when investors needed reliable information on bond risks, Moody's (NYSE: MCO) provides credit ratings, risk assessment tools, and analytical solutions that help organizations evaluate financial risks and make informed investment decisions.
Why Is MCO a Top Pick?
- Solid 14.5% annual revenue growth over the last two years indicates its offering’s solve complex business issues
- Share buybacks catapulted its annual earnings per share growth to 22.3%, which outperformed its revenue gains over the last two years
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
Moody's is trading at $499 per share, or 30.8x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More
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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.
