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. Keeping that in mind, here is one company with a net cash position that can leverage its balance sheet to grow and two with hidden risks.
Two Stocks to Sell:
Landstar (LSTR)
Net Cash Position: $375.4 million (6.2% of Market Cap)
Covering billions of miles throughout North America, Landstar (NASDAQ: LSTR) is a transportation company specializing in freight and last-mile delivery services.
Why Are We Out on LSTR?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5.4% annually over the last two years
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
Landstar is trading at $178.85 per share, or 33x forward P/E. To fully understand why you should be careful with LSTR, check out our full research report (it’s free).
STAAR Surgical (STAA)
Net Cash Position: $114.8 million (9.3% of Market Cap)
With over 2.5 million implants performed worldwide, STAAR Surgical (NASDAQ: STAA) designs and manufactures implantable lenses that correct vision problems without removing the eye's natural lens.
Why Is STAA Risky?
- Annual sales declines of 13.8% for the past two years show its products and services struggled to connect with the market during this cycle
- 29.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
STAAR Surgical’s stock price of $24.93 implies a valuation ratio of 45.7x forward P/E. If you’re considering STAA for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Nicolet Bankshares (NIC)
Net Cash Position: $339.4 million (10.3% of Market Cap)
Starting as Green Bay Financial Corporation in 2000 before rebranding in 2002, Nicolet Bankshares (NYSE: NIC) is a regional bank holding company that provides commercial, agricultural, and consumer banking services primarily in Wisconsin, Michigan, and Minnesota.
Why Should You Buy NIC?
- Annual net interest income growth of 21.9% over the past five years was outstanding, reflecting market share gains this cycle
- Projected net interest income growth of 43.9% for the next 12 months is above its five-year trend, pointing to accelerating demand
- Net interest margin increased by 65 basis points (100 basis points = 1 percentage point) over the last two years, giving the firm more capital to invest or return to shareholders
At $154.64 per share, Nicolet Bankshares trades at 1.8x 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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