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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. That said, here are two cash-producing companies that excel at turning cash into shareholder value and one that may face some trouble.

One Stock to Sell:

PVH (PVH)

Trailing 12-Month Free Cash Flow Margin: 6.7%

Founded in 1881 by a husband and wife duo, PVH (NYSE:PVH) is a global fashion conglomerate with iconic brands like Calvin Klein and Tommy Hilfiger.

Why Should You Sell PVH?

1. Weak constant currency growth over the past two years indicates challenges in maintaining its market share

2. Projected sales for the next 12 months are flat and suggest demand will be subdued

3. Low returns on capital reflect management’s struggle to allocate funds effectively

PVH’s stock price of $68.71 implies a valuation ratio of 6x forward P/E. Check out our free in-depth research report to learn more about why PVH doesn’t pass our bar.

Two Stocks to Watch:

Brinker International (EAT)

Trailing 12-Month Free Cash Flow Margin: 7.6%

Founded by Norman Brinker in Dallas, Brinker International (NYSE:EAT) is a casual restaurant chain that operates the Chili’s, Maggiano’s Little Italy, and It’s Just Wings banners.

Why Does EAT Stand Out?

1. Same-store sales growth averaged 11.7% over the past two years, showing it’s bringing new and repeat diners into its restaurants

2. Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage

3. Free cash flow margin increased by 4.2 percentage points over the last year, giving the company more capital to invest or return to shareholders

At $129.31 per share, Brinker International trades at 14x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.

EXL (EXLS)

Trailing 12-Month Free Cash Flow Margin: 12.9%

Originally founded as an outsourcing company in 1999 before evolving into a technology-focused enterprise, EXL (NASDAQ:EXLS) provides data analytics and AI-powered digital operations solutions that help businesses transform their operations and make better decisions.

Why Is EXLS a Top Pick?

1. Market share has increased this cycle as its 13.8% annual revenue growth over the last five years was exceptional

2. Share repurchases over the last five years enabled its annual earnings per share growth of 22.4% to outpace its revenue gains

3. Robust free cash flow margin of 11.5% gives it many options for capital deployment