2 Cash-Heavy Stocks with Impressive Fundamentals and 1 We Find Risky
Companies with more cash than debt can be financially resilient, but that doesn’t mean they’re all strong investments. Some lack leverage because they struggle to grow or generate consistent profits, making them unattractive borrowers.
Not all businesses with cash are winners, and that’s why we built StockStory - to help you separate the good from the bad. Keeping that in mind, here are two companies with net cash positions that can leverage their balance sheets to grow and one that may struggle.
One Stock to Sell:
Citizens Financial Group (CFG)
Net Cash Position: $792 million (2.8% of Market Cap)
Tracing its roots back to 1828 as a community-focused institution, Citizens Financial Group (NYSE:CFG) is a regional bank that provides retail and commercial banking services to individuals, small businesses, and large corporations across 14 states.
Why Are We Hesitant About CFG?
- Sales trends were unexciting over the last two years as its 2.6% annual growth was below the typical banking company
- Muted 5.8% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Performance over the past five years shows its incremental sales were less profitable, as its 2.5% annual earnings per share growth trailed its revenue gains
Citizens Financial Group is trading at $65.41 per share, or 1.1x forward P/B. If you’re considering CFG for your portfolio, see our FREE research report to learn more.
Two Stocks to Buy:
DoorDash (DASH)
Net Cash Position: $2.22 billion (2.8% of Market Cap)
Founded by Stanford students with the intent to build “the local, on-demand FedEx", DoorDash (NASDAQ:DASH) operates an on-demand food delivery platform.
Why Is DASH a Top Pick?
- Orders have grown by 22% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 931% annually, topping its revenue gains
- Free cash flow margin grew by 13 percentage points over the last few years, giving the company more chips to play with
DoorDash’s stock price of $185.11 implies a valuation ratio of 22.6x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
Pure Storage (PSTG)
Net Cash Position: $1.33 billion (5.8% of Market Cap)
Founded in 2009 as a pioneer in enterprise all-flash storage technology, Pure Storage (NYSE:PSTG) provides all-flash data storage hardware and software that helps organizations manage their data more efficiently across on-premises and cloud environments.
Why Will PSTG Outperform?
- Offerings are pivotal for their customers' operations as its ARR has averaged 20.1% growth over the past two years
- Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 61.7% outpaced its revenue gains
- Strong free cash flow margin of 17.4% enables it to reinvest or return capital consistently, and its recently improved profitability means it has even more resources to invest or distribute
At $67.74 per share, Pure Storage trades at 29.4x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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