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.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here is one cash-producing company that excels at turning cash into shareholder value and two that may struggle to keep up.

Two Stocks to Sell:

Dayforce (DAY)

Trailing 12-Month Free Cash Flow Margin: 12.1%

Rebranded from Ceridian in January 2024 to highlight its flagship product, Dayforce $(DAY)$ provides cloud-based software that helps organizations manage their entire employee lifecycle, including HR, payroll, workforce management, benefits, and talent development.

Why Does DAY Worry Us?

1. 17.8% annual revenue growth over the last three years was slower than its software peers
2. Gross margin of 50.9% reflects its high servicing costs
3. Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 1.3 percentage points

Dayforce’s stock price of $67.24 implies a valuation ratio of 5.3x forward price-to-sales. Check out our free in-depth research report to learn more about why DAY doesn’t pass our bar.

J. M. Smucker (SJM)

Trailing 12-Month Free Cash Flow Margin: 9.4%

Best known for its fruit jams and spreads, J.M Smucker $(SJM)$ is a packaged foods company whose products span from peanut butter and coffee to pet food.

Why Are We Out on SJM?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 23.7 percentage points
3. Low returns on capital reflect management’s struggle to allocate funds effectively, and its decreasing returns suggest its historical profit centers are aging

At $113.36 per share, J. M. Smucker trades at 11x forward P/E. To fully understand why you should be careful with SJM, check out our full research report (it’s free).

One Stock to Watch:

Qualcomm (QCOM)

Trailing 12-Month Free Cash Flow Margin: 27%

Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm $(QCOM)$ is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.

Why Are We Fans of QCOM?

1. Impressive 16.6% annual revenue growth over the last five years indicates it’s winning market share this cycle
2. QCOM is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
3. Industry-leading 51.2% return on capital demonstrates management’s skill in finding high-return investments

Qualcomm is trading at $154.96 per share, or 13.3x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

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