A cash-heavy balance sheet is often a sign of strength, but not always. Some companies avoid debt because they have weak business models, limited expansion opportunities, or inconsistent cash flow.
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. Keeping that in mind, here are three companies with net cash positions that don’t make the cut and some better choices instead.
EverQuote (EVER)
Net Cash Position: $176.2 million (25.1% of Market Cap)
Aiming to simplify a once complicated process, EverQuote (NASDAQ: EVER) is an online insurance marketplace where consumers can compare and purchase various types of insurance from different providers
Why Does EVER Fall Short?
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
At $19.97 per share, EverQuote trades at 0.9x forward price-to-gross profit. Check out our free in-depth research report to learn more about why EVER doesn’t pass our bar.
Proto Labs (PRLB)
Net Cash Position: $133.9 million (7.2% of Market Cap)
Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE: PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.
Why Do We Steer Clear of PRLB?
- Sales trends were unexciting over the last two years as its 3.9% annual growth was below the typical industrials company
- Earnings per share have dipped by 2.9% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Proto Labs is trading at $78.93 per share, or 38.8x forward P/E. If you’re considering PRLB for your portfolio, see our FREE research report to learn more.
United Bankshares (UBSI)
Net Cash Position: $1.43 billion (23.1% of Market Cap)
With roots dating back to 1982 and a strong presence in the Mid-Atlantic region, United Bankshares (NASDAQ: UBSI) is a bank holding company that provides commercial and retail banking services through its United Bank subsidiary across multiple states.
Why Does UBSI Give Us Pause?
- 8.8% annual net interest income growth over the last five years was slower than its banking peers
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 2.5% annually
- Estimated tangible book value per share growth of 6.3% for the next 12 months implies profitability will slow from its two-year trend
United Bankshares’s stock price of $45.66 implies a valuation ratio of 1.1x forward P/B. To fully understand why you should be careful with UBSI, check out our full research report (it’s free).
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