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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may struggle to keep up.
One Stock to Sell:
ZoomInfo (ZI)
Trailing 12-Month Free Cash Flow Margin: 37.1%
Founded in 2007 as DiscoveryOrg and renamed after a merger in 2019, ZoomInfo (NASDAQ:ZI) is a software as a service product that provides sales departments with access to a database of prospective clients.
Why Do We Avoid ZI?
- Flat billings over the last year suggest it may need to improve its products, pricing, or go-to-market strategy to reinvigorate demand
- Complex implementation process for enterprise clients means customers take longer to ramp up, as seen in its extended payback periods
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 10.3 percentage points
ZoomInfo’s stock price of $10.28 implies a valuation ratio of 2.9x forward price-to-sales. Read our free research report to see why you should think twice about including ZI in your portfolio.
Two Stocks to Watch:
Semrush (SEMR)
Trailing 12-Month Free Cash Flow Margin: 10.6%
Started by Oleg Shchegolev while still in university, Semrush (NYSE:SEMR) is a software-as-a-service platform that helps companies optimize their search engine and content marketing efforts.
Why Are We Positive On SEMR?
- Average billings growth of 24.8% over the last year enhances its liquidity and shows there is steady demand for its products
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable three-year growth trajectory
- Software is difficult to replicate at scale and results in a stellar gross margin of 82.1%
At $10.19 per share, Semrush trades at 3.3x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Vital Farms (VITL)
Trailing 12-Month Free Cash Flow Margin: 2.5%
With an emphasis on ethically produced products, Vital Farms (NASDAQ:VITL) specializes in pasture-raised eggs and butter.
Why Is VITL a Top Pick?
- Products are flying off the shelves as its unit sales averaged 17.8% growth over the past two years
- Expected revenue growth of 26.6% for the next year suggests its market share will rise
- Earnings per share grew by 161% annually over the last three years and trumped its peers
Vital Farms is trading at $33 per share, or 23.8x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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.