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.
Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here are two cash-producing companies that excel at turning cash into shareholder value and one that may struggle to keep up.
One Stock to Sell:
DigitalOcean (DOCN)
Trailing 12-Month Free Cash Flow Margin: 18.6%
Built for simplicity in a world of complex cloud solutions, DigitalOcean (NYSE: DOCN) provides a simplified cloud computing platform that enables developers and small businesses to quickly deploy and scale applications.
Why Does DOCN Give Us Pause?
- Customers have churned over the last year due to the commoditized nature of its software, as reflected in its 99.8% net revenue retention rate
- Gross margin of 59.9% is way below its competitors, leaving less money to invest in areas like marketing and R&D
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
At $78.85 per share, DigitalOcean trades at 7.9x forward price-to-sales. Read our free research report to see why you should think twice about including DOCN in your portfolio.
Two Stocks to Buy:
Guidewire Software (GWRE)
Trailing 12-Month Free Cash Flow Margin: 21.9%
With its systems powering the operations of hundreds of insurance brands across 42 countries, Guidewire Software (NYSE: GWRE) provides a technology platform that helps property and casualty insurance companies manage their core operations, digital engagement, and analytics.
Why Are We Backing GWRE?
- Billings growth has averaged 21.1% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
- Free cash flow generation is better than most peers and allows it to explore new investment opportunities
Guidewire Software’s stock price of $163.02 implies a valuation ratio of 9.1x forward price-to-sales. Is now the right time to buy? See for yourself in our full research report, it’s free.
Euronet Worldwide (EEFT)
Trailing 12-Month Free Cash Flow Margin: 10.2%
Operating a global network of over 47,000 ATMs and 821,000 point-of-sale terminals across more than 60 countries, Euronet Worldwide (NASDAQ: EEFT) provides electronic payment solutions including ATM services, prepaid product processing, and international money transfer services.
Why Are We Bullish on EEFT?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 11.3% annual sales growth over the last five years
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 28% exceeded its revenue gains over the last five years
- Industry-leading 19.3% return on equity demonstrates management’s skill in finding high-return investments
Euronet Worldwide is trading at $71.55 per share, or 6.6x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
