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.
Financial flexibility is valuable, but it’s not everything - at StockStory, we help you find the stocks that can not only survive but also outperform. That said, here is one company with a net cash position that can leverage its balance sheet to grow and two best left off your watchlist.
Two Stocks to Sell:
BILL (BILL)
Net Cash Position: $354.4 million (9.6% of Market Cap)
Transforming the messy back-office financial operations that plague small business owners, BILL (NYSE: BILL) provides a cloud-based platform that automates accounts payable, accounts receivable, and expense management for small and midsize businesses.
Why Do We Think BILL Will Underperform?
- Products, pricing, or go-to-market strategy may need some adjustments as its 11.7% average billings growth over the last year was weak
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Static operating margin over the last year shows it couldn’t become more efficient
At $37.31 per share, BILL trades at 2.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than BILL.
Stitch Fix (SFIX)
Net Cash Position: $147.1 million (29.4% of Market Cap)
One of the original subscription box companies, Stitch Fix (NASDAQ: SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.
Why Should You Dump SFIX?
- Sluggish trends in its active clients suggest customers aren’t adopting its solutions as quickly as the company hoped
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Stitch Fix’s stock price of $3.62 implies a valuation ratio of 0.4x forward price-to-sales. Check out our free in-depth research report to learn more about why SFIX doesn’t pass our bar.
One Stock to Buy:
NerdWallet (NRDS)
Net Cash Position: $91.8 million (12.9% of Market Cap)
Born from founder Tim Chen's frustration with the lack of transparent credit card information when helping his sister in 2009, NerdWallet (NASDAQ: NRDS) is a digital platform that provides financial guidance to help consumers and small businesses make smarter decisions about credit cards, loans, insurance, and other financial products.
Why Do We Love NRDS?
- Impressive 27.8% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Share buybacks catapulted its annual earnings per share growth to 252%, which outperformed its revenue gains over the last two years
NerdWallet is trading at $10.94 per share, or 8x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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