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 excels at turning cash into shareholder value and two that may face some trouble.
Two Stocks to Sell:
BJ's (BJRI)
Trailing 12-Month Free Cash Flow Margin: 2.9%
Founded in 1978 in California, BJ’s Restaurants (NASDAQ: BJRI) is a chain of restaurants whose menu features classic American dishes, often with a twist.
Why Do We Avoid BJRI?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Lacking pricing power results in an inferior gross margin of 14.9% that must be offset by turning more tables
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $35.14 per share, BJ's trades at 15.4x forward P/E. Check out our free in-depth research report to learn more about why BJRI doesn’t pass our bar.
Masimo (MASI)
Trailing 12-Month Free Cash Flow Margin: 14.4%
Founded in 1989 to solve the "unsolvable problem" of accurate pulse oximetry during patient movement, Masimo (NASDAQ: MASI) develops and manufactures noninvasive patient monitoring technologies, including its breakthrough pulse oximetry systems that accurately measure blood oxygen levels even during patient movement.
Why Does MASI Worry Us?
- Annual sales declines of 16.3% for the past two years show its products and services struggled to connect with the market during this cycle
- Subscale operations are evident in its revenue base of $1.48 billion, meaning it has fewer distribution channels than its larger rivals
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Masimo is trading at $175.41 per share, or 30.5x forward P/E. Read our free research report to see why you should think twice about including MASI in your portfolio.
One Stock to Buy:
HNI (HNI)
Trailing 12-Month Free Cash Flow Margin: 7.4%
With roots dating back to 1944 and a significant acquisition of Kimball International in 2023, HNI (NYSE: HNI) manufactures and sells office furniture systems, seating, and storage solutions, as well as residential fireplaces and heating products.
Why Do We Love HNI?
- 8% annual revenue growth over the last two years surpassed the sector average as its services resonated with customers
- Projected revenue growth of 116% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Additional sales over the last five years increased its profitability as the 14.3% annual growth in its earnings per share outpaced its revenue
HNI’s stock price of $43.30 implies a valuation ratio of 10.7x 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
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
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.
