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 are three companies with net cash positions to steer clear of and a few alternatives to consider.
PACCAR (PCAR)
Net Cash Position: $8.60 billion (13.9% of Market Cap)
Founded more than a century ago, PACCAR (NASDAQ: PCAR) designs and manufactures commercial trucks of various weights and sizes for the commercial trucking industry.
Why Are We Wary of PCAR?
- Sales tumbled by 11.4% annually over the last two years, showing market trends are working against it during this cycle
- Earnings per share have dipped by 30.2% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $119.12 per share, PACCAR trades at 20x forward P/E. Check out our free in-depth research report to learn more about why PCAR doesn’t pass our bar.
Blink Charging (BLNK)
Net Cash Position: $33.19 million (33.9% of Market Cap)
One of the first EV charging companies to go public, Blink Charging (NASDAQ: BLNK) is a manufacturer, owner, operator, and provider of electric vehicle charging equipment and networked EV charging services.
Why Do We Think Twice About BLNK?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 18.7% annually over the last two years
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Blink Charging’s stock price of $0.66 implies a valuation ratio of 0.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than BLNK.
T. Rowe Price (TROW)
Net Cash Position: $3.71 billion (16% of Market Cap)
Founded in 1937 by Thomas Rowe Price Jr., who pioneered the growth stock investing approach, T. Rowe Price (NASDAQ: TROW) is an investment management firm that offers mutual funds, advisory services, and retirement planning solutions to individuals and institutions.
Why Does TROW Give Us Pause?
- Sales trends were unexciting over the last five years as its 2.6% annual growth was below the typical financials company
- Earnings per share fell by 1.4% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
T. Rowe Price is trading at $109.60 per share, or 11.3x forward P/E. To fully understand why you should be careful with TROW, check out our full research report (it’s free).
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