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. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two best left off your watchlist.

Two Stocks to Sell:

Lockheed Martin (LMT)

Trailing 12-Month Free Cash Flow Margin: 9.2%

Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE: LMT) specializes in defense, space, homeland security, and information technology products.

Why Are We Out on LMT?

1. New orders were hard to come by as its average backlog growth of 7.2% over the past two years underwhelmed
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 2.6% annually
3. Waning returns on capital imply its previous profit engines are losing steam

Lockheed Martin’s stock price of $636.22 implies a valuation ratio of 21.1x forward P/E. Check out our free in-depth research report to learn more about why LMT doesn’t pass our bar.

Connection (CNXN)

Trailing 12-Month Free Cash Flow Margin: 2%

Starting as a small computer products seller in 1982 and evolving into a Fortune 1000 company, Connection (NASDAQ: CNXN) is a technology solutions provider that helps businesses and government agencies design, purchase, implement, and manage their IT infrastructure and systems.

Why Do We Avoid CNXN?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
2. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 3.3% annually
3. Low free cash flow margin of 3.3% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

At $64.30 per share, Connection trades at 17.2x forward P/E. Dive into our free research report to see why there are better opportunities than CNXN.

One Stock to Watch:

Abbott Laboratories (ABT)

Trailing 12-Month Free Cash Flow Margin: 15.9%

With roots dating back to 1888 when founder Dr. Wallace Abbott began producing precise, dosage-form medications, Abbott Laboratories (NYSE: ABT) develops and sells a diverse range of healthcare products including medical devices, diagnostics, nutrition products, and branded generic pharmaceuticals.

Why Are We Positive On ABT?

1. Large revenue base of $44.33 billion gives it negotiating leverage and staying power in an industry with high barriers to entry
2. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
3. Industry-leading 13.3% return on capital demonstrates management’s skill in finding high-return investments

Abbott Laboratories is trading at $111.69 per share, or 20x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More

If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.

Don’t wait for the next volatility shock. Check out our Top 9 Market-Beating Stocks. 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 Kadant (+351% five-year return). Find your next big winner with StockStory today.