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 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:
Krispy Kreme (DNUT)
Trailing 12-Month Free Cash Flow Margin: 2.5%
Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ:DNUT) is one of the most beloved and well-known fast-food chains in the world.
Why Should You Sell DNUT?
- Sales trends were unexciting over the last seven years as its 6.2% annual growth was below the typical restaurant company
- Negative free cash flow raises questions about the return timeline for its investments
- 8× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Krispy Kreme’s stock price of $3.03 implies a valuation ratio of 44x forward P/E. Read our free research report to see why you should think twice about including DNUT in your portfolio.
Two Stocks to Buy:
Allison Transmission (ALSN)
Trailing 12-Month Free Cash Flow Margin: 16.7%
Helping build race cars at one point, Allison Transmission (NYSE:ALSN) offers transmissions to original equipment manufacturers and fleet operators.
What Makes ALSN Stand Out?
- Annual revenue growth of 18.9% over the last two years was superb and indicates its market share increased during this cycle
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- ALSN is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
At $110.65 per share, Allison Transmission trades at 10.2x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Watts Water Technologies (WTS)
Trailing 12-Month Free Cash Flow Margin: 13.1%
Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Do We Love WTS?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 9.9% annual sales growth over the last five years
- Share buybacks catapulted its annual earnings per share growth to 19.2%, which outperformed its revenue gains over the last five years
- Free cash flow margin expanded by 6.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Watts Water Technologies is trading at $352.62 per share, or 26.3x 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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.