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. Keeping that in mind, here are two companies with net cash positions that balance growth with stability and one that may struggle.
One Stock to Sell:
Boston Beer (SAM)
Net Cash Position: $129.4 million (6.4% of Market Cap)
Known for its flavorful beverages challenging the status quo, Boston Beer (NYSE: SAM) is a pioneer in craft brewing and a symbol of American innovation in the alcoholic beverage industry.
Why Are We Cautious About SAM?
- Products aren't resonating with the market as its revenue declined by 2.1% annually over the last three years
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Boston Beer is trading at $197.54 per share, or 20.7x forward P/E. Check out our free in-depth research report to learn more about why SAM doesn’t pass our bar.
Two Stocks to Buy:
Alignment Healthcare (ALHC)
Net Cash Position: $375.6 million (10.1% of Market Cap)
Founded in 2013 with a mission to transform healthcare for seniors, Alignment Healthcare (NASDAQ: ALHC) provides Medicare Advantage health plans for seniors with features like concierge services, transportation benefits, and technology-driven care coordination.
Why Are We Backing ALHC?
- Annual revenue growth of 45.4% over the last two years was superb and indicates its market share increased during this cycle
- Earnings per share grew by 28.5% annually over the last four years and trumped its peers
- Free cash flow margin grew by 11 percentage points over the last five years, giving the company more chips to play with
At $18.00 per share, Alignment Healthcare trades at 20.4x forward EV-to-EBITDA. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Skyward Specialty Insurance (SKWD)
Net Cash Position: -$169.6 million (-8.2% of Market Cap)
Founded in 2006 to serve markets where standard insurance coverage falls short, Skyward Specialty Insurance (NASDAQ: SKWD) provides customized commercial property, casualty, and health insurance solutions for underserved or specialized market niches.
Why Is SKWD a Good Business?
- Strong 27.6% annualized net premiums earned expansion over the last two years shows it’s capturing market share this cycle
- Expected revenue growth of 25% for the next year suggests its market share will rise
- Annual book value per share growth of 26% over the last two years was superb and indicates its capital strength increased during this cycle
Skyward Specialty Insurance’s stock price of $46.69 implies a valuation ratio of 1.5x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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