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.
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 leverages its financial strength to beat its competitors and two that may face some trouble.
Two Stocks to Sell:
Transocean (RIG)
Trailing 12-Month Free Cash Flow Margin: 22%
Operating one of the world's most capable fleets of ultra-deepwater drillships and harsh environment rigs, Transocean (NYSE:RIG) operates drilling rigs that energy companies rent to drill oil and gas wells in deep ocean waters.
Why Are We Out on RIG?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 3.3% annually over the last ten years
- Gross margin of 37.8% is below its competitors, leaving less money to invest in exploration and production
- Poor free cash flow margin of 5.2% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
At $5.45 per share, Transocean trades at 30.4x forward P/E. If you’re considering RIG for your portfolio, see our FREE research report to learn more.
Oceaneering (OII)
Trailing 12-Month Free Cash Flow Margin: 7.8%
Deploying a fleet of 250 tethered underwater robots around the globe, Oceaneering International (NYSE:OII) provides remotely operated underwater vehicles and subsea equipment for offshore energy exploration.
Why Is OII Risky?
- Sales trends were unexciting over the last five years as its 9.8% annual growth was below the typical energy upstream and integrated energy company
- Gross margin of 17.7% reflects its high production costs and unfavorable asset base
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Oceaneering’s stock price of $46.66 implies a valuation ratio of 21.2x forward P/E. Check out our free in-depth research report to learn more about why OII doesn’t pass our bar.
One Stock to Watch:
First Advantage (FA)
Trailing 12-Month Free Cash Flow Margin: 11.8%
Processing over 200 million screens annually across more than 200 countries and territories, First Advantage (NASDAQ:FA) provides employment background screening, identity verification, and compliance solutions to help companies manage hiring risks.
Why Do We Like FA?
- Annual revenue growth of 48.2% over the past two years was outstanding, reflecting market share gains this cycle
- $1.66 billion in revenue allows it to spread its fixed costs across a wider base
- Sales outlook for the upcoming 12 months implies the business will stay on its desirable two-year growth trajectory
First Advantage is trading at $19.92 per share, or 14.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.