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.
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:
Amtech (ASYS)
Trailing 12-Month Free Cash Flow Margin: 8.7%
Focusing on the silicon carbide and power semiconductor sectors, Amtech Systems (NASDAQ:ASYS) produces the machinery and related chemicals needed for manufacturing semiconductors.
Why Do We Think ASYS Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 16.3% annually over the last two years
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Negative returns on capital show management lost money while trying to expand the business, and its decreasing returns suggest its historical profit centers are aging
Amtech’s stock price of $16.40 implies a valuation ratio of 35.1x forward P/E. To fully understand why you should be careful with ASYS, check out our full research report (it’s free).
Ducommun (DCO)
Trailing 12-Month Free Cash Flow Margin: 5.5%
California’s oldest company, Ducommun (NYSE:DCO) is a provider of engineering and manufacturing services for high-performance products primarily within the aerospace and defense industries.
Why Do We Think Twice About DCO?
- Average backlog growth of 4.8% over the past two years was mediocre and suggests fewer customers signed long-term contracts
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 12.2 percentage points
- ROIC of 2.8% reflects management’s challenges in identifying attractive investment opportunities, and its falling returns suggest its earlier profit pools are drying up
Ducommun is trading at $112.21 per share, or 27.4x forward P/E. Read our free research report to see why you should think twice about including DCO in your portfolio.
One Stock to Watch:
Tetra Tech (TTEK)
Trailing 12-Month Free Cash Flow Margin: 9.5%
With a 50-year legacy of "Leading with Science" and operations on all seven continents, Tetra Tech (NASDAQ:TTEK) provides high-end consulting and engineering services focused on water management, environmental solutions, and sustainable infrastructure for government and commercial clients worldwide.
Why Do We Watch TTEK?
- Annual revenue growth of 14.5% over the past five years was outstanding, reflecting market share gains this cycle
- Adjusted operating margin improvement of 2.3 percentage points over the last five years demonstrates its ability to scale efficiently
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $36.51 per share, Tetra Tech trades at 25x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Check out the high-quality names we’ve flagged in 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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.