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.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two best left off your watchlist.
Two Stocks to Sell:
Coupang (CPNG)
Trailing 12-Month Free Cash Flow Margin: 1.5%
Founded in 2010 by Harvard Business School student Bom Kim, Coupang (NYSE: CPNG) is an e-commerce giant often referred to as the "Amazon of South Korea".
Why Is CPNG Not Exciting?
- Gross margin of 29.1% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Coupang’s stock price of $20.44 implies a valuation ratio of 17.5x forward EV/EBITDA. To fully understand why you should be careful with CPNG, check out our full research report (it’s free).
Viatris (VTRS)
Trailing 12-Month Free Cash Flow Margin: 13.5%
Created through the 2020 merger of Mylan and Pfizer's Upjohn division, Viatris (NASDAQ: VTRS) is a healthcare company that develops, manufactures, and distributes branded and generic medicines across more than 165 countries worldwide.
Why Do We Think VTRS Will Underperform?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.7% annually over the last two years
- Earnings per share fell by 9.8% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Negative returns on capital show management lost money while trying to expand the business, and its decreasing returns suggest its historical profit centers are aging
At $13.46 per share, Viatris trades at 5.5x forward P/E. If you’re considering VTRS for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Globus Medical (GMED)
Trailing 12-Month Free Cash Flow Margin: 20%
With operations spanning 64 countries and a portfolio of over 10 new products launched in 2023 alone, Globus Medical (NYSE: GMED) develops and sells implantable devices, surgical instruments, and technology solutions for spine, orthopedic, and neurosurgical procedures.
Why Are We Fans of GMED?
- Average constant currency growth of 22.3% over the past two years demonstrates its ability to grow internationally despite currency fluctuations
- Earnings growth has trumped its peers over the last five years as its EPS has compounded at 22.8% annually
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
Globus Medical is trading at $85.70 per share, or 19x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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