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

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 excels at turning cash into shareholder value and two that may face some trouble.

Two Stocks to Sell:

Cars.com (CARS)

Trailing 12-Month Free Cash Flow Margin: 17.8%

Originally started as a joint venture between several media companies including The Washington Post and The New York Times, Cars.com (NYSE:CARS) is a digital marketplace that connects new and used car buyers and sellers.

Why Are We Wary of CARS?

1. Increasing competition is redirecting attention to other platforms as it failed to grow its dealer customers over the last two years

2. Estimated sales growth of 2.9% for the next 12 months implies demand will slow from its three-year trend

3. Earnings per share were flat over the last three years while its revenue grew, showing its incremental sales were less profitable

At $11.27 per share, Cars.com trades at 3.4x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why CARS doesn’t pass our bar .

CSX (CSX)

Trailing 12-Month Free Cash Flow Margin: 19.5%

Established as part of the Chessie System and Seaboard Coast Line Industries merger, CSX (NASDAQ:CSX) is a transportation company specializing in freight rail services.

Why Do We Avoid CSX?

1. Flat unit sales over the past two years suggest it might have to lower prices to accelerate growth

2. Sales were less profitable over the last two years as its earnings per share fell by 6.6% annually, worse than its revenue declines

3. Free cash flow margin shrank by 15.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

CSX’s stock price of $27.58 implies a valuation ratio of 15.1x forward price-to-earnings. If you’re considering CSX for your portfolio, see our FREE research report to learn more .

One Stock to Buy:

Lululemon (LULU)

Trailing 12-Month Free Cash Flow Margin: 15%

Originally serving yogis and hockey players, Lululemon (NASDAQ:LULU) is a designer, distributor, and retailer of athletic apparel for men and women.

Why Will LULU Beat the Market?

1. Brick-and-mortar locations are witnessing elevated demand as their same-store sales growth averaged 8.1% over the past two years

2. Differentiated product assortment leads to a best-in-class gross margin of 58.8%

3. LULU is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders