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. That said, here is one cash-producing company that reinvests wisely to drive long-term success and two that may struggle to keep up.
Two Business Services Stocks to Sell:
ICF International (ICFI)
Trailing 12-Month Free Cash Flow Margin: 6.4%
Operating at the intersection of policy, technology, and implementation for over five decades, ICF International (NASDAQ: ICFI) provides professional consulting services and technology solutions to government agencies and commercial clients across energy, health, environment, and security sectors.
Why Is ICFI Risky?
- Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 7.4% declines over the past two years
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.4%
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 2% annually
ICF International’s stock price of $83.02 implies a valuation ratio of 11.3x forward P/E. Read our free research report to see why you should think twice about including ICFI in your portfolio.
Equifax (EFX)
Trailing 12-Month Free Cash Flow Margin: 18.7%
Holding detailed financial records on over 800 million consumers worldwide and dating back to 1899, Equifax (NYSE: EFX) is a global data analytics company that collects, analyzes, and sells consumer and business credit information to lenders, employers, and other businesses.
Why Does EFX Give Us Pause?
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 4.1 percentage points
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 2.2% annually
Equifax is trading at $206.66 per share, or 24.1x forward P/E. If you’re considering EFX for your portfolio, see our FREE research report to learn more.
One Business Services Stock to Buy:
Globalstar (GSAT)
Trailing 12-Month Free Cash Flow Margin: 96.1%
Known for powering the emergency SOS feature in newer Apple iPhones, Globalstar (NASDAQ: GSAT) operates a network of low-earth orbit satellites that provide voice and data communications services in remote areas where traditional cellular networks don't reach.
Why Will GSAT Beat the Market?
- Market share has increased this cycle as its 16.3% annual revenue growth over the last five years was exceptional
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its recently improved profitability means it has even more resources to invest or distribute
- Historical investments are beginning to pay off as its returns on capital are growing
At $61.88 per share, Globalstar trades at 497.8x 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
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