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.
Just because a business has cash doesn’t mean it’s a good investment. Luckily, StockStory is here to help you separate the winners from the losers. That said, here are two companies with net cash positions that can continue growing sustainably and one that may struggle.
One Stock to Sell:
Lennar (LEN)
Net Cash Position: $812.4 million (3.5% of Market Cap)
One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Why Do We Avoid LEN?
- Backlog has dropped by 9.2% on average over the past two years, suggesting it’s losing orders as competition picks up
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 8.9% annually while its revenue grew
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $93 per share, Lennar trades at 13.1x forward P/E. Check out our free in-depth research report to learn more about why LEN doesn’t pass our bar.
Two Stocks to Buy:
EMCOR (EME)
Net Cash Position: $406 million (1.1% of Market Cap)
Through its network of over 70 subsidiaries, EMCOR (NYSE: EME) provides electrical, mechanical, and building construction and services
Why Are We Bullish on EME?
- Impressive 16.3% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 40.2% exceeded its revenue gains over the last two years
- Returns on capital are growing as management capitalizes on its market opportunities
EMCOR’s stock price of $858.56 implies a valuation ratio of 28.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Evercore (EVR)
Net Cash Position: $385.1 million (2.8% of Market Cap)
Founded in 1995 as a boutique advisory firm focused on independence and client trust, Evercore (NYSE: EVR) is an independent investment banking firm that provides strategic advisory, capital markets, and wealth management services to corporations, financial sponsors, and high-net-worth individuals.
Why Should You Buy EVR?
- Annual revenue growth of 36.6% over the past two years was outstanding, reflecting market share gains this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 70.2% outpaced its revenue gains
- Stellar return on equity showcases management’s ability to surface highly profitable business ventures
Evercore is trading at $353.27 per share, or 20.4x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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