A surplus of cash can mean financial stability, but it can also indicate a reluctance (or inability) to invest in growth. Some of these companies also face challenges like stagnating revenue, declining market share, or limited scalability.
Not all businesses with cash are winners, and that’s why we built StockStory - to help you separate the good from the bad. That said, here are two companies with net cash positions that can continue growing sustainably and one with hidden risks.
One Stock to Sell:
Wix (WIX)
Net Cash Position: $13.63 million (0.3% of Market Cap)
Powering over 263 million registered users worldwide with its AI-driven tools, Wix (NASDAQ: WIX) provides a cloud-based platform that helps individuals and businesses create and manage professional websites without requiring coding skills.
Why Does WIX Give Us Pause?
- Products, pricing, or go-to-market strategy may need some adjustments as its 13.7% average billings growth over the last year was weak
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 3.6 percentage points
At $86.90 per share, Wix trades at 2.3x forward price-to-sales. Read our free research report to see why you should think twice about including WIX in your portfolio.
Two Stocks to Buy:
FuelCell Energy (FCEL)
Net Cash Position: $162.7 million (41.6% of Market Cap)
Founded in 1969, FuelCell Energy (NASDAQ: FCEL) is a leading manufacturer and developer of carbonate fuel cell technology for stationary power generation.
Why Are We Bullish on FCEL?
- Backlog has averaged 9.9% growth over the past two years, showing it has a pipeline of unfulfilled orders that will support revenue in the future
- Earnings per share have massively outperformed its peers over the last two years, increasing by 25.9% annually
- Cash burn has decreased over the last five years, showing the company is becoming a more self-sustaining business
FuelCell Energy is trading at $8.21 per share, or 1.7x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Paymentus (PAY)
Net Cash Position: $280.6 million (8.4% of Market Cap)
Founded in 2004 to simplify the complex world of bill payments, Paymentus (NYSE: PAY) provides a cloud-based platform that helps utilities, municipalities, and service providers automate billing and payment processes.
Why Will PAY Outperform?
- Annual revenue growth of 39% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 86.3% over the last two years outstripped its revenue performance
Paymentus’s stock price of $27.24 implies a valuation ratio of 39.1x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
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