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.

Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. 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:

BeautyHealth (SKIN)

Trailing 12-Month Free Cash Flow Margin: 9.3%

Operating in the emerging beauty health category, the appropriately named BeautyHealth (NASDAQ:SKIN) is a skincare company best known for its Hydrafacial product that cleanses and hydrates skin.

Why Should You Dump SKIN?

1. Annual revenue growth of 3.8% over the last three years was below our standards for the consumer staples sector

2. Historical operating losses point to an inefficient cost structure

3. High net-debt-to-EBITDA ratio of 10× could force the company to raise capital at unfavorable terms if market conditions deteriorate

BeautyHealth’s stock price of $1.54 implies a valuation ratio of 12.2x forward EV-to-EBITDA. To fully understand why you should be careful with SKIN, check out our full research report (it’s free) .

General Dynamics (GD)

Trailing 12-Month Free Cash Flow Margin: 6.8%

Creator of the famous M1 Abrahms tank, General Dynamics (NYSE:GD) develops aerospace, marine systems, combat systems, and information technology products.

Why Does GD Give Us Pause?

1. Backlog failed to grow over the past two years, suggesting the company may need to tweak its product roadmap and go-to-market strategy

2. Estimated sales growth of 3.1% for the next 12 months implies demand will slow from its two-year trend

3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 2.6 percentage points

At $279 per share, General Dynamics trades at 18.5x forward P/E. If you’re considering GD for your portfolio, see our FREE research report to learn more .

One Stock to Buy:

Airbnb (ABNB)

Trailing 12-Month Free Cash Flow Margin: 38.8%

Founded by Brian Chesky and Joe Gebbia in their San Francisco apartment, Airbnb (NASDAQ:ABNB) is the world’s largest online marketplace for lodging, primarily homestays.

Why Is ABNB a Top Pick?

1. Nights and Experiences Booked are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features

2. Earnings per share have massively outperformed its peers over the last three years, increasing by 49.4% annually

3. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends