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 is one company with a net cash position that can leverage its balance sheet to grow and two best left off your watchlist.
Two Stocks to Sell:
nLIGHT (LASR)
Net Cash Position: $315.6 million (13.5% of Market Cap)
Founded by a former CEO and Harvard-educated entrepreneur Scott Keeneyn, nLIGHT (NASDAQ: LASR) offers semiconductor and fiber lasers to the industrial, aerospace & defense, and medical sectors.
Why Is LASR Not Exciting?
- Sales trends were unexciting over the last five years as its 3.8% annual growth was below the typical industrials company
- Poor expense management has led to operating margin losses
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
At $40.57 per share, nLIGHT trades at 104x forward P/E. To fully understand why you should be careful with LASR, check out our full research report (it’s free).
Expeditors (EXPD)
Net Cash Position: $464.2 million (1.9% of Market Cap)
Expeditors (NYSE: EXPD) offers air and ocean freight as well as brokerage services.
Why Does EXPD Fall Short?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last five years
- Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 13.5%
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Expeditors is trading at $192.50 per share, or 24x forward P/E. If you’re considering EXPD for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Toast (TOST)
Net Cash Position: $1.68 billion (9.8% of Market Cap)
Born from the frustrations of three friends waiting too long for their restaurant bill, Toast (NYSE: TOST) provides a cloud-based digital technology platform with software, payment processing, and hardware solutions built specifically for restaurants.
Why Do We Like TOST?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Projected revenue growth of 19.9% for the next 12 months suggests its momentum from the last two years will persist
Toast’s stock price of $29.88 implies a valuation ratio of 2.1x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
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