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. That said, here are three companies with net cash positions to steer clear of and a few alternatives to consider.
Cal-Maine (CALM)
Net Cash Position: $1.14 billion (31.3% of Market Cap)
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ: CALM) produces, packages, and distributes eggs.
Why Do We Think Twice About CALM?
- Lackluster 4.3% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Sales are projected to tank by 20% over the next 12 months as demand evaporates
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 8.1 percentage points
Cal-Maine is trading at $73.85 per share, or 22.6x forward P/E. If you’re considering CALM for your portfolio, see our FREE research report to learn more.
Matrix Service (MTRX)
Net Cash Position: $204.6 million (59.7% of Market Cap)
Founded in Oklahoma, Matrix Service (NASDAQ: MTRX) provides engineering, fabrication, construction, and maintenance services primarily to the energy and industrial markets.
Why Are We Hesitant About MTRX?
- Annual revenue growth of 1.1% over the last five years was below our standards for the industrials sector
- High input costs result in an inferior gross margin of 3.7% that must be offset through higher volumes
- Earnings per share fell by 21.4% annually over the last five years while its revenue grew, partly because it diluted shareholders
Matrix Service’s stock price of $12.20 implies a valuation ratio of 18.6x forward P/E. Dive into our free research report to see why there are better opportunities than MTRX.
LeMaitre (LMAT)
Net Cash Position: $173.5 million (6.6% of Market Cap)
Founded in 1983 and named after a pioneering vascular surgeon, LeMaitre Vascular (NASDAQGM:LMAT) develops and manufactures specialized medical devices used by vascular surgeons to treat peripheral vascular disease and other circulatory conditions.
Why Are We Cautious About LMAT?
- Revenue base of $249.6 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
At $114.39 per share, LeMaitre trades at 38.4x forward P/E. Check out our free in-depth research report to learn more about why LMAT doesn’t pass our bar.
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