A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two that may struggle to keep up.
Two Stocks to Sell:
Illinois Tool Works (ITW)
Trailing 12-Month Free Cash Flow Margin: 17.9%
Founded by Byron Smith, an investor who held over 100 patents, Illinois Tool Works (NYSE: ITW) manufactures engineered components and specialized equipment for numerous industries.
Why Are We Cautious About ITW?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.3%
- Flat earnings per share over the last two years lagged its peers
Illinois Tool Works is trading at $264.59 per share, or 23.8x forward P/E. If you’re considering ITW for your portfolio, see our FREE research report to learn more.
Pfizer (PFE)
Trailing 12-Month Free Cash Flow Margin: 16.5%
With roots dating back to 1849 when two German immigrants opened a fine chemicals business in Brooklyn, Pfizer (NYSE: PFE) is a global biopharmaceutical company that discovers, develops, manufactures, and sells medicines and vaccines for a wide range of diseases and conditions.
Why Does PFE Give Us Pause?
- 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
- 26.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Pfizer’s stock price of $25.75 implies a valuation ratio of 8.9x forward P/E. Read our free research report to see why you should think twice about including PFE in your portfolio.
One Stock to Buy:
RBC Bearings (RBC)
Trailing 12-Month Free Cash Flow Margin: 17.7%
With a Guinness World Record for engineering the largest spherical plain bearing, RBC Bearings (NYSE: RBC) is a manufacturer of bearings and related components for the aerospace & defense, industrial, and transportation industries.
Why Is RBC a Top Pick?
- Annual revenue growth of 21% over the past five years was outstanding, reflecting market share gains this cycle
- Earnings growth has trumped its peers over the last five years as its EPS has compounded at 19.7% annually
- Strong free cash flow margin of 15.6% enables it to reinvest or return capital consistently
At $499.88 per share, RBC Bearings trades at 39.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. 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.
