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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.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. That said, here is one cash-producing company that leverages its financial strength to beat its competitors and two best left off your watchlist.

Two Stocks to Sell:

eXp World (EXPI)

Trailing 12-Month Free Cash Flow Margin: 4%

Founded in 2009, eXp World (NASDAQ:EXPI) is a real estate company known for its virtual, cloud-based approach to real estate brokerage.

Why Do We Think EXPI Will Underperform?

1. Number of agents and brokers has disappointed over the past two years, indicating weak demand for its offerings

2. Responsiveness to unforeseen market trends is restricted due to its substandard operating profitability

3. Negative returns on capital show management lost money while trying to expand the business

eXp World’s stock price of $9.16 implies a valuation ratio of 11.7x forward price-to-earnings. Read our free research report to see why you should think twice about including EXPI in your portfolio, it’s free.

Diebold Nixdorf (DBD)

Trailing 12-Month Free Cash Flow Margin: 2.9%

With roots dating back to 1859 and a presence in over 100 countries, Diebold Nixdorf (NYSE:DBD) provides automated self-service technology, software, and services that help banks and retailers digitize their customer transactions.

Why Are We Cautious About DBD?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.2% annually over the last five years

2. Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend

3. Cash-burning history makes us doubt the long-term viability of its business model

At $44.33 per share, Diebold Nixdorf trades at 9x forward price-to-earnings. To fully understand why you should be careful with DBD, check out our full research report (it’s free).

One Stock to Watch:

Wabtec (WAB)

Trailing 12-Month Free Cash Flow Margin: 14%

Also known as Wabtec, Westinghouse Air Brake Technologies (NYSE:WAB) provides equipment, systems, and related software for the railway industry.

Why Are We Positive On WAB?

1. Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 9.5% over the past two years

2. Operating margin improvement of 6.3 percentage points over the last five years demonstrates its ability to scale efficiently

3. Share repurchases over the last two years enabled its annual earnings per share growth of 25.5% to outpace its revenue gains