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. That said, here are two companies with net cash positions that can continue growing sustainably and one that may struggle.
One Stock to Sell:
Columbia Sportswear (COLM)
Net Cash Position: $313.1 million (9.9% of Market Cap)
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ: COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Why Do We Steer Clear of COLM?
- 6.3% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Free cash flow margin is expected to remain in place over the coming year
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
Columbia Sportswear is trading at $60.29 per share, or 17.6x forward P/E. Dive into our free research report to see why there are better opportunities than COLM.
Two Stocks to Watch:
Molina Healthcare (MOH)
Net Cash Position: $1.55 billion (16.9% of Market Cap)
Founded in 1980 as a provider for underserved communities in Southern California, Molina Healthcare (NYSE: MOH) provides managed healthcare services primarily to low-income individuals through Medicaid, Medicare, and Marketplace insurance programs across 21 states.
Why Do We Watch MOH?
- Annual revenue growth of 16.2% over the last five years beat the sector average and underscores the unique value of its offerings
- Economies of scale give it fixed cost leverage when sales grow as well as negotiating power over membership pricing and reimbursement rates
At $176.30 per share, Molina Healthcare trades at 30.1x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stifel (SF)
Net Cash Position: $3.18 billion (26.8% of Market Cap)
Tracing its roots back to 1890 when the firm was established in St. Louis, Stifel Financial (NYSE: SF) is a financial services firm that provides wealth management, investment banking, and institutional brokerage services to individuals, corporations, and institutions.
Why Are We Positive On SF?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 13.9% annual sales growth over the last two years
- Additional sales over the last two years increased its profitability as the 32.9% annual growth in its earnings per share outpaced its revenue
- Industry-leading 13.3% return on equity demonstrates management’s skill in finding high-return investments
Stifel’s stock price of $77.19 implies a valuation ratio of 12x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
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