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 three companies with net cash positions to avoid and some better alternatives instead.

Fiverr (FVRR)

Net Cash Position: $417.2 million (118% of Market Cap)

Based in Tel Aviv, Fiverr (NYSE: FVRR) operates a fixed price global freelance marketplace for digital services.

Why Does FVRR Worry Us?

1. Active Buyers have declined by 12.3% annually over the last two years, suggesting it may need to revamp its features or user experience to stay competitive
2. Projected sales decline of 7% for the next 12 months points to a tough demand environment ahead
3. High marketing expenses suggest it needs to spend heavily on new customer acquisition to sustain momentum

Fiverr’s stock price of $10.88 implies a valuation ratio of 1.2x forward price-to-gross profit. To fully understand why you should be careful with FVRR, check out our full research report (it’s free).

Pegasystems (PEGA)

Net Cash Position: $416.9 million (7.6% of Market Cap)

With a "Center-out Business Architecture" approach that transcends organizational silos, Pegasystems (NASDAQ: PEGA) develops software that helps organizations automate workflows and use artificial intelligence to improve customer experiences and business processes.

Why Do We Steer Clear of PEGA?

1. Products, pricing, or go-to-market strategy may need some adjustments as its 5.1% average billings growth over the last year was weak
2. Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
3. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 6.3 percentage points

Pegasystems is trading at $31.64 per share, or 2.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than PEGA.

Moderna (MRNA)

Net Cash Position: $3.91 billion (19.8% of Market Cap)

Rising to global prominence during the COVID-19 pandemic with one of the first effective vaccines, Moderna (NASDAQ: MRNA) develops messenger RNA (mRNA) medicines that direct the body's cells to produce proteins with therapeutic or preventive benefits for various diseases.

Why Do We Pass on MRNA?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 34.3% annually over the last two years
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 46.5% annually, worse than its revenue
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 129.7 percentage points

At $80.47 per share, Moderna trades at 14.9x forward price-to-sales. Read our free research report to see why you should think twice about including MRNA in your portfolio.

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