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. That said, here are two cash-producing companies that leverage their financial strength to beat the competition and one that may struggle to keep up.

One Stock to Sell:

Wix (WIX)

Trailing 12-Month Free Cash Flow Margin: 28.6%

Founded in 2006 in Tel Aviv, Wix.com (NASDAQ:WIX) offers a free and easy to operate website building platform.

Why Do We Think Twice About WIX?

1. Revenue increased by 11.5% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds

2. Gross margin of 68.1% reflects its relatively high servicing costs

Wix is trading at $151.73 per share, or 4.5x forward price-to-sales. To fully understand why you should be careful with WIX, check out our full research report (it’s free).

Two Stocks to Watch:

Veeva Systems (VEEV)

Trailing 12-Month Free Cash Flow Margin: 41.5%

Built on top of Salesforce as one of the first vertical-focused cloud platforms, Veeva (NYSE:VEEV) provides data and customer relationship management (CRM) software for organizations in the life sciences industry.

Why Do We Watch VEEV?

1. Winning new contracts that can potentially increase in value as its billings growth has averaged 14.6% over the last year

2. Excellent operating margin of 27% highlights the efficiency of its business model, and it turbocharged its profits by achieving some fixed cost leverage

3. VEEV is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

Veeva Systems’s stock price of $285 implies a valuation ratio of 14.9x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.

Lam Research (LRCX)

Trailing 12-Month Free Cash Flow Margin: 22.1%

Founded in 1980 by David Lam, the man who pioneered semiconductor etching technology, Lam Research (NASDAQ:LRCX) is one of the leading providers of wafer fabrication equipment used to make semiconductors.

Why Does LRCX Stand Out?

1. Healthy operating margin of 29.6% shows it’s a well-run company with efficient processes, and its operating leverage amplified its profits over the last five years

2. Strong free cash flow margin of 26.6% enables it to reinvest or return capital consistently, and its recently improved profitability means it has even more resources to invest or distribute

3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures