Cash-Producing Stock to Target This Week and 2 We Question

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.

Luckily for you, we built StockStory to help you separate the good from the bad. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two that may face some trouble.

Trailing 12-Month Free Cash Flow Margin: 24%

Formerly known as Career Education Corporation, Perdoceo Education (NASDAQ:PRDO) is an educational services company that specializes in postsecondary education.

Why Should You Sell PRDO?

1. Sales trends were unexciting over the last five years as its 3.7% annual growth was below the typical consumer discretionary company

2. Earnings growth underperformed the sector average over the last five years as its EPS grew by just 10.8% annually

3. Diminishing returns on capital suggest its earlier profit pools are drying up

Perdoceo Education’s stock price of $27.41 implies a valuation ratio of 37.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why PRDO doesn’t pass our bar.

Trailing 12-Month Free Cash Flow Margin: 4.8%

Involved in the design of the Apple Store on Fifth Avenue in New York City, Apogee (NASDAQ:APOG) sells architectural products and services such as high-performance glass for commercial buildings.

Why Do We Steer Clear of APOG?

1. Annual sales declines of 1.3% for the past two years show its products and services struggled to connect with the market during this cycle

2. Projected sales growth of 1% for the next 12 months suggests sluggish demand

3. Earnings per share have dipped by 8.7% annually over the past two years, which is concerning because stock prices follow EPS over the long term

Apogee is trading at $36.41 per share, or 9x forward P/E. To fully understand why you should be careful with APOG, check out our full research report (it’s free for active Edge members).

Trailing 12-Month Free Cash Flow Margin: 6%

Working alongside some of the most popular mobile carriers in the world, Dycom (NYSE:DY) builds and maintains telecommunications infrastructure.

Why Do We Love DY?

1. Market share has increased this cycle as its 11.8% annual revenue growth over the last two years was exceptional

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

3. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue