Businesses with strong free cash flow tend to be more adaptable and resilient. Some of these companies shine bright by using their cash wisely to strengthen their market positions.
Identifying the most effective companies isn’t easy, and that’s why we started StockStory. That said, here are three cash-producing companies that excel at turning cash into shareholder value.
Coinbase (COIN)
Trailing 12-Month Free Cash Flow Margin: 28.2%
Widely regarded as the face of crypto, Coinbase (NASDAQ:COIN) is a blockchain infrastructure company updating the financial system with its trading, staking, stablecoin, and other payment solutions.
Why Are We Backing COIN?
- Customer spending is rising as the company has focused on monetization over the last two years, leading to 58.2% annual growth in its average revenue per user
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 64.5% over the last two years outstripped its revenue performance
- Robust free cash flow margin of 25.9% gives it many options for capital deployment, and its improved cash conversion implies it’s becoming a less capital-intensive business
Coinbase is trading at $407.50 per share, or 31.4x forward EV/EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free.
Ross Stores (ROST)
Trailing 12-Month Free Cash Flow Margin: 7.6%
Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ:ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.
Why Are We Positive On ROST?
- Aggressive strategy of rolling out new stores to gobble up whitespace is prudent given its same-store sales growth
- Same-store sales growth averaged 3.5% over the past two years, showing it’s bringing new and repeat shoppers into its stores
- ROIC punches in at 28.3%, illustrating management’s expertise in identifying profitable investments, and its rising returns show it’s making even more lucrative bets
At $136.58 per share, Ross Stores trades at 20.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
H&R Block (HRB)
Trailing 12-Month Free Cash Flow Margin: 17.5%
Founded in 1955 by brothers Henry W. Bloch and Richard A. Bloch, H&R Block (NYSE:HRB) is a tax preparation company offering professional tax assistance and financial solutions to individuals and small businesses.
Why Are We Bullish on HRB?
- Remarkable 30.5% revenue growth over the last five years demonstrates its ability to capture significant market share
- Share buybacks catapulted its annual earnings per share growth to 41.5%, which outperformed its revenue gains over the last five years
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures, and its returns are climbing as it finds even more attractive growth opportunities
H&R Block’s stock price of $54.57 implies a valuation ratio of 16.4x forward EV-to-EBITDA. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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