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 that may struggle.
Two Stocks to Sell:
First Hawaiian Bank (FHB)
Net Cash Position: $997.2 million (33.3% of Market Cap)
Dating back to 1858 as Hawaii's oldest bank with deep roots in the Pacific island communities, First Hawaiian (NASDAQ: FHB) operates a full-service community bank providing deposit accounts, commercial and consumer loans, credit cards, and wealth management services across Hawaii, Guam, and Saipan.
Why Is FHB Risky?
- Net interest income trends were unexciting over the last five years as its 5.1% annual growth was below the typical banking firm
- Performance over the past five years shows its incremental sales were less profitable, as its 1.6% annual earnings per share growth trailed its revenue gains
- Estimated tangible book value per share growth of 3.3% for the next 12 months implies profitability will slow from its two-year trend
First Hawaiian Bank is trading at $24.62 per share, or 1x forward P/B. If you’re considering FHB for your portfolio, see our FREE research report to learn more.
Customers Bancorp (CUBI)
Net Cash Position: $1.80 billion (71.8% of Market Cap)
Originally founded with a "high-tech, high-touch" branch-light banking strategy, Customers Bancorp (NYSE: CUBI) is a bank holding company that provides commercial and consumer banking services through its Customers Bank subsidiary, with a focus on business lending and digital banking.
Why Are We Cautious About CUBI?
- Net interest income trends were unexciting over the last five years as its 9.5% annual growth was below the typical banking firm
- Weak unit economics are reflected in its net interest margin of 3.2%, one of the worst among bank companies
- Incremental sales over the last five years were less profitable as its 4.2% annual earnings per share growth lagged its revenue gains
Customers Bancorp’s stock price of $73.99 implies a valuation ratio of 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than CUBI.
One Stock to Watch:
agilon health (AGL)
Net Cash Position: $155.3 million (11.6% of Market Cap)
Transforming how doctors care for seniors by shifting financial incentives from volume to outcomes, agilon health (NYSE: AGL) provides a platform that helps primary care physicians transition to value-based care models for Medicare patients through long-term partnerships and global capitation arrangements.
Why Is AGL on Our Radar?
- Market share has increased this cycle as its 30.8% annual revenue growth over the last five years was exceptional
- Earnings growth has trumped its peers over the last five years as its EPS has compounded at 17.3% annually
- Cash burn has decreased over the last five years, showing the company is becoming a more self-sustaining business
At $80 per share, agilon health trades at 46x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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