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A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.

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 excels at turning cash into shareholder value and two that may struggle to keep up.

Two Stocks to Sell:

Astec (ASTE)

Trailing 12-Month Free Cash Flow Margin: 5.4%

Inventing the first ever double-barrel hot-mix asphalt plant, Astec (NASDAQ:ASTE) provides machines and equipment for building roads, processing raw materials, and producing concrete.

Why Do We Avoid ASTE?

1. Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 28.1% declines over the past two years

2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.5%

3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 8.1 percentage points

Astec is trading at $42.50 per share, or 15.1x forward P/E. Read our free research report to see why you should think twice about including ASTE in your portfolio, it’s free.

Alight (ALIT)

Trailing 12-Month Free Cash Flow Margin: 4.6%

Born from a corporate spinoff in 2017 to focus on employee experience technology, Alight (NYSE:ALIT) provides human capital management solutions that help companies administer employee benefits, payroll, and workforce management systems.

Why Do We Pass on ALIT?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.9% annually over the last five years

2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

3. Underwhelming 0.6% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam

At $5.85 per share, Alight trades at 9.2x forward P/E. Check out our free in-depth research report to learn more about why ALIT doesn’t pass our bar.

One Stock to Buy:

Magnite (MGNI)

Trailing 12-Month Free Cash Flow Margin: 38.1%

Born from the 2020 merger of Rubicon Project and Telaria, Magnite (NASDAQ:MGNI) operates the world's largest independent sell-side advertising platform that automates the buying and selling of digital advertising inventory across all channels and formats.

Why Are We Backing MGNI?

1. Annual revenue growth of 33.3% over the last five years was superb and indicates its market share increased during this cycle

2. MGNI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute

3. Returns on capital are increasing as management’s prior bets are starting to bear fruit