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. That said, here is one company with a net cash position that can continue growing sustainably and two that may struggle.
Two Stocks to Sell:
Teradata (TDC)
Net Cash Position: $315 million (12.7% of Market Cap)
Pioneering data warehousing technology in the 1980s before "big data" was a common term, Teradata (NYSE: TDC) provides cloud-based data analytics and AI platforms that help large enterprises integrate, analyze, and leverage their data across multiple environments.
Why Do We Steer Clear of TDC?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 3.4% underwhelmed
- Operating margin declined by 3.5 percentage points over the last year as its sales cratered
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 25.3 percentage points
At $26.95 per share, Teradata trades at 1.6x forward price-to-sales. Read our free research report to see why you should think twice about including TDC in your portfolio.
Energy Recovery (ERII)
Net Cash Position: $82.17 million (20.7% of Market Cap)
Having saved far more than a trillion gallons of water, Energy Recovery (NASDAQ: ERII) provides energy recovery devices to the water treatment, oil and gas, and chemical processing sectors.
Why Does ERII Fall Short?
- Annual sales declines of 5% for the past two years show its products and services struggled to connect with the market during this cycle
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Flat earnings per share over the last two years underperformed the sector average
Energy Recovery’s stock price of $7.86 implies a valuation ratio of 35.9x forward P/E. Check out our free in-depth research report to learn more about why ERII doesn’t pass our bar.
One Stock to Watch:
Dynatrace (DT)
Net Cash Position: $949.6 million (6.6% of Market Cap)
With its platform processing over 30 trillion pieces of IT performance data daily, Dynatrace (NYSE: DT) provides an AI-powered platform that helps organizations monitor, secure, and optimize their applications and IT infrastructure across cloud environments.
Why Are We Positive on DT?
- ARR trends over the last year show it’s maintaining a steady flow of long-term contracts that contribute positively to its revenue predictability
- Prominent and differentiated software culminates in a premier gross margin of 81.6%
- Robust free cash flow margin of 27.2% gives it many options for capital deployment
Dynatrace is trading at $49.25 per share, or 6.1x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
