A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
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 best left off your watchlist.
Two Stocks to Sell:
Autodesk (ADSK)
Trailing 12-Month Free Cash Flow Margin: 30.7%
Starting with AutoCAD in the 1980s and evolving into a comprehensive design ecosystem, Autodesk (NASDAQ:ADSK) provides software solutions for architecture, engineering, construction, manufacturing, and entertainment industries to design, simulate, and visualize projects.
Why Does ADSK Give Us Pause?
- Revenue increased by 13.5% annually over the last five years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Operating margin didn’t move over the last year, showing it couldn’t increase its efficiency
Autodesk is trading at $300.36 per share, or 8.3x forward price-to-sales. Dive into our free research report to see why there are better opportunities than ADSK.
Charles River Laboratories (CRL)
Trailing 12-Month Free Cash Flow Margin: 13.5%
Named after the Massachusetts river where it was founded in 1947, Charles River Laboratories (NYSE:CRL) provides non-clinical drug development services, research models, and manufacturing support to pharmaceutical and biotechnology companies.
Why Does CRL Worry Us?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Sales are projected to be flat over the next 12 months and imply weak demand
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $203.01 per share, Charles River Laboratories trades at 18.7x forward P/E. Read our free research report to see why you should think twice about including CRL in your portfolio.
One Stock to Watch:
Cadence Design Systems (CDNS)
Trailing 12-Month Free Cash Flow Margin: 28.4%
Powering the chips behind everything from smartphones to AI accelerators for over 35 years, Cadence Design Systems (NASDAQ:CDNS) provides essential computational software, hardware, and intellectual property used by engineers to design and verify advanced electronic systems and semiconductors.
Why Could CDNS Be a Winner?
- Billings growth has averaged 21.8% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Software is difficult to replicate at scale and leads to a best-in-class gross margin of 86.6%
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
Cadence Design Systems’s stock price of $317.50 implies a valuation ratio of 15x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.