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.
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. Keeping that in mind, here are three companies with net cash positions to avoid and some better alternatives instead.
Nature's Sunshine (NATR)
Net cash position: $68.35 million (30.3% of Market Cap)
Started on a kitchen table in Utah, Nature’s Sunshine (NASDAQ: NATR) manufactures and sells nutritional and personal care products.
Why Do We Think Twice About NATR?
- 3% annual revenue growth over the last three years was slower than its consumer staples peers
- Subscale operations are evident in its revenue base of $480.3 million, meaning it has fewer distribution channels than its larger rivals
- Free cash flow margin dropped by 4.4 percentage points over the last year, implying the company became more capital intensive as competition picked up
Nature's Sunshine’s stock price of $10.09 implies a valuation ratio of 11.4x forward P/E. Check out our free in-depth research report to learn more about why NATR doesn’t pass our bar.
Coupang (CPNG)
Net cash position: $387 million (1.3% of Market Cap)
Founded in 2010 by Harvard Business School student Bom Kim, Coupang (NYSE: CPNG) is an e-commerce giant often referred to as the "Amazon of South Korea".
Why Are We Hesitant About CPNG?
- White space opportunities may be dwindling as its growth in active customers averaged a weak 6.6%
- Bad unit economics and steep infrastructure costs are reflected in its low gross margin of 28.6%
- Incremental sales over the last three years were much less profitable as its earnings per share fell by 55.9% annually while its revenue grew
At $16.59 per share, Coupang trades at 14.5x forward EV/EBITDA. Read our free research report to see why you should think twice about including CPNG in your portfolio.
Northern Trust (NTRS)
Net cash position: $15.17 billion (47.1% of Market Cap)
Founded in 1889 during Chicago's post-Great Fire rebuilding boom, Northern Trust (NASDAQ: NTRS) provides wealth management, asset servicing, and banking solutions to corporations, institutions, families, and high-net-worth individuals globally.
Why Are We Cautious About NTRS?
- Annual revenue growth of 6.9% over the last five years was below our standards for the financials sector
Northern Trust is trading at $178.15 per share, or 13.6x forward P/E. To fully understand why you should be careful with NTRS, check out our full research report (it’s free).
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