Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.

Not all companies are created equal, and StockStory is here to surface the ones with real upside. Keeping that in mind, here are two cash-producing companies that excel at turning cash into shareholder value and one that may face some trouble.

One Stock to Sell:

Etsy (ETSY)

Trailing 12-Month Free Cash Flow Margin: 25.2%

Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NASDAQ:ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.

Why Are We Cautious About ETSY?

1. Active Buyers have stagnated over the last two years, indicating its platform may be struggling to differentiate itself from competitors

2. Projected sales are flat for the next 12 months, implying 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

Etsy is trading at $45.11 per share, or 7.2x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why ETSY doesn’t pass our bar .

Two Stocks to Watch:

Upwork (UPWK)

Trailing 12-Month Free Cash Flow Margin: 22%

Formed through the 2013 merger of Elance and oDesk, Upwork (NASDAQ:UPWK) is an online platform where businesses and independent professionals connect to get work done.

Why Could UPWK Be a Winner?

1. Customer spending is rising as the company has focused on monetization over the last two years, leading to 8.4% annual growth in its average revenue per customer

2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 168% over the last three years outstripped its revenue performance

3. Free cash flow margin increased by 21.1 percentage points over the last few years, giving the company more capital to invest or return to shareholders

At $13.59 per share, Upwork trades at 10.2x forward EV-to-EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free .

Samsara (IOT)

Trailing 12-Month Free Cash Flow Margin: 8.9%

One of the few public companies where Marc Andreessen is a Board member, Samsara (NYSE:IOT) provides software and hardware to track industrial equipment, assets, and fleets.

Why Is IOT a Top Pick?

1. ARR growth averaged 35% over the last year, showing customers are willing to take multi-year bets on its offerings

2. Market share will likely rise over the next 12 months as its expected revenue growth of 22.8% is robust

3. Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage