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.
Not all businesses with cash are winners, and that’s why we built StockStory - to help you separate the good from the bad. That said, here is one company with a net cash position that can continue growing sustainably and two best left off your watchlist.
Two Stocks to Sell:
Byrna (BYRN)
Net Cash Position: $7.44 million (5.1% of Market Cap)
Providing civilians with tools to disable, disarm, and deter would-be assailants, Byrna (NASDAQ: BYRN) is a provider of non-lethal weapons.
Why Is BYRN Not Exciting?
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Negative returns on capital show management lost money while trying to expand the business
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $5.84 per share, Byrna trades at 24.4x forward EV-to-EBITDA. To fully understand why you should be careful with BYRN, check out our full research report (it’s free).
Moelis (MC)
Net Cash Position: $129.1 million (2.5% of Market Cap)
Founded in 2007 by veteran banker Ken Moelis during the lead-up to the financial crisis, Moelis & Company (NYSE: MC) is an independent investment bank that provides strategic and financial advisory services to corporations, financial sponsors, governments, and sovereign wealth funds.
Why Does MC Give Us Pause?
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 3.8% annually
- Products and services are facing significant credit quality challenges during this cycle as tangible book value per share has declined by 3.5% annually over the last five years
Moelis is trading at $66.91 per share, or 19.8x forward P/E. Read our free research report to see why you should think twice about including MC in your portfolio.
One Stock to Buy:
Lyft (LYFT)
Net Cash Position: $553.5 million (10.6% of Market Cap)
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Why Will LYFT Outperform?
- Active Riders have grown by 12.9% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 69.1% outpaced its revenue gains
- Free cash flow margin grew by 24.1 percentage points over the last few years, giving the company more chips to play with
Lyft’s stock price of $14.27 implies a valuation ratio of 7x forward EV/EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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