Three Cash-Producing Companies That Don't Deliver

While a strong cash flow is often seen as an indicator of a company's financial health, it doesn't always translate to superior returns on investment. In fact, some companies with high cash flows struggle with inefficient spending, slowing demand, or weak competitive positioning. At StockStory, we help investors identify the companies that truly put their cash flow to work, instead of just accumulating cash for its own sake.

Here, we take a closer look at three cash-producing companies that don't make the cut and explore some better opportunities as alternatives.

Heartland Express: A Trucking Company with a Declining Revenue Stream

• Founded by the son of a trucker, Heartland Express (HTLD) offers full-truckload deliveries across the United States and Mexico.
  • Trailing 12-Month Free Cash Flow Margin of 6.3%

Unfortunately, HTLD's recent performance has been underwhelming. Revenue declined by 14.2% annually over the last two years as customers postponed purchases of its products and services.

This decrease in revenue is concerning because it indicates that HTLD is struggling to maintain demand for its services.
    Even more alarming is the fact that capital intensity has increased significantly over the last five years, resulting in a decreased free cash flow margin by 12.7 percentage points. In other words, HTLD's spending has become less efficient, which could ultimately lead to reduced profitability.

When looking at these figures, it becomes apparent why management's recent investments are not yielding expected returns on capital. Eroding returns from an already low base indicate that HTLD is destroying value with its current strategies. The stock price of $8.48 implies a valuation ratio of 7.8x forward EV-to-EBITDA.

Proto Labs: A Custom Prototyping Company Underperforming Its Peers

• Proto Labs (PRLB) offers online quoting and manufacturing for custom prototypes and low-volume production parts.
  • Trailing 12-Month Free Cash Flow Margin of 13%

While PRLB is a pioneer in its industry, recent revenue growth has been muted. The company's demand has lagged behind its industrials peers, with annual growth rate of only 2.4% over the last two years.

In terms of efficiency, Proto Labs' operating margin fell by 7.6 percentage points over the last five years. This decrease in profitability is concerning because it indicates that PRLB's spending has become less efficient. Another red flag for investors is the declining earnings per share (EPS) by 9.3% annually over the past five years. Since stock prices often follow EPS trends over time, this downward trend could have significant implications for PRLB's future performance.

Furthermore, Proto Labs' current stock price of $49.64 per share may seem reasonable at first glance, especially considering its forward EV-to-EBITDA ratio is around 33.5. This level of valuation may not be justified by the company's recent financials and growth prospects.

MarketAxess: An Electronic Bond Trading Platform Struggling to Keep Up

• MarketAxess (MKTX) operates electronic trading platforms that enable institutional investors and broker-dealers to efficiently trade fixed-income securities.
  • Trailing 12-Month Free Cash Flow Margin of 38.9%

However, despite its pioneering role in electronic bond trading since 2000, MKTX's recent growth has been underwhelming. The company's revenue grew by only 6.4% annually over the last five years, significantly lower than its financials peers.

The fact that annual earnings per share growth of just 1.7% underperforms its revenue growth is concerning because it shows that MKTX's incremental sales have become less profitable.

MarketAxess' stock price of $178.21 implies a valuation ratio of 22.3x forward P/E. While this level may seem reasonable at first glance, considering the company's market position and financials, investors need to weigh this against its subpar performance compared to peers in other industries.

Our assessment indicates that MarketAxess is unlikely to outperform the broader market moving forward.

High-Quality Stocks for All Market Conditions

When market downturns occur, many investors become anxious about holding onto their portfolio. However, research has shown that during times of economic uncertainty, certain stocks tend to perform exceptionally well due to their ability to adapt and thrive despite external pressures.

These are called high-quality stocks, characterized by strong financial metrics such as substantial revenue growth, robust profitability margins, an efficient return on capital.

Here's a list of some top momentum stocks from our research that have shown market-beating performance over the last five years. They're well-positioned to continue delivering returns in today's turbulent markets.

Stocks that Have Consistently Delivered Strong Returns

Nvidia, a household name, has generated an impressive return of 1,545% between March 2020 and March 2025. Similarly, Tecnoglass, once a micro-cap company but now a well-established player in the industry, achieved a stunning 1,754% five-year return.

While past performance is not indicative of future results, this data does provide valuable insight into these companies' adaptability and potential for ongoing growth and innovation.

At StockStory, we're committed to equipping our users with actionable insights on identifying top-performing stocks that can navigate changing market conditions. Our team of analysts and sector experts continually evaluate the performance of select markets to deliver unparalleled knowledge to subscribers.

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We are currently hiring top talent in equity analysis and marketing roles. If you have a track record as a 0-to-1 builder passionate about the markets and cutting-edge tech, be sure to check out our current job listings today!