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.
Financial flexibility is valuable, but it’s not everything - at StockStory, we help you find the stocks that can not only survive but also outperform. That said, here are two companies with net cash positions that balance growth with stability and one best left off your watchlist.
One Stock to Sell:
IPG Photonics (IPGP)
Net Cash Position: $839.3 million (15.9% of Market Cap)
Both a designer and manufacturer of its products, IPG Photonics (NASDAQ: IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.
Why Should You Dump IPGP?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 11.7% annually over the last two years
- Persistent operating margin losses and eroding margin over the last five years point to growing market pressures and a poorly managed expense base
- Free cash flow margin shrank by 18.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
IPG Photonics is trading at $124.58 per share, or 69.1x forward P/E. Read our free research report to see why you should think twice about including IPGP in your portfolio.
Two Stocks to Buy:
First Solar (FSLR)
Net Cash Position: $2.36 billion (11.3% of Market Cap)
Headquartered in Arizona, First Solar (NASDAQ: FSLR) specializes in manufacturing solar panels and providing photovoltaic solar energy solutions.
Why Are We Backing FSLR?
- Impressive 25.4% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Free cash flow turned positive over the last five years, showing the company is at an important crossroads
- Rising returns on capital show management is finding more attractive investment opportunities
At $193.29 per share, First Solar trades at 11.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
QuinStreet (QNST)
Net Cash Position: $97.78 million (13.2% of Market Cap)
Founded during the dot-com era in 1999 and specializing in high-intent consumer traffic, QuinStreet (NASDAQ: QNST) operates digital performance marketplaces that connect clients in financial and home services with consumers actively searching for their products.
Why Will QNST Outperform?
- Annual revenue growth of 41.8% over the last two years was superb and indicates its market share increased during this cycle
- Earnings per share grew by 454% annually over the last two years and trumped its peers
- Improving returns on capital suggest its past investments are beginning to deliver value
QuinStreet’s stock price of $13.03 implies a valuation ratio of 8.4x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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