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. Keeping that in mind, here are three companies with net cash positions that don’t make the cut and some better choices instead.
Photronics (PLAB)
Net Cash Position: $671.7 million (39.9% of Market Cap)
Sporting a global footprint of facilities, Photronics (NASDAQ: PLAB) is a manufacturer of photomasks, templates used to transfer patterns onto semiconductor wafers.
Why Is PLAB Not Exciting?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Anticipated sales growth of 2.2% for the next year implies demand will be shaky
- Gross margin of 34.7% is below its competitors, leaving less money to invest in areas like marketing and R&D
Photronics’s stock price of $28.68 implies a valuation ratio of 13.6x forward P/E. Check out our free in-depth research report to learn more about why PLAB doesn’t pass our bar.
Deckers (DECK)
Net Cash Position: $1.13 billion (10.4% of Market Cap)
Established in 1973, Deckers (NYSE: DECK) is a footwear and apparel conglomerate with a portfolio of lifestyle and performance brands.
Why Is DECK Risky?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $79.68 per share, Deckers trades at 10.2x forward P/E. Dive into our free research report to see why there are better opportunities than DECK.
News Corp (NWSA)
Net Cash Position: $20 million (0.1% of Market Cap)
Established in 2013 after a restructuring, News Corp (NASDAQ: NWSA) is a multinational conglomerate known for its news publishing, broadcasting, digital media, and book publishing.
Why Do We Avoid NWSA?
- Products and services fail to spark excitement with consumers, as seen in its flat sales over the last five years
- Poor free cash flow margin of 7.9% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Stagnant returns on capital show management has failed to improve the company’s business quality
News Corp is trading at $30.18 per share, or 22.7x forward P/E. Read our free research report to see why you should think twice about including NWSA in your portfolio.
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