Companies with more cash than debt can be financially resilient, but that doesn’t mean they’re all strong investments. Some lack leverage because they struggle to grow or generate consistent profits, making them unattractive borrowers.
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 with hidden risks.
Two Stocks to Sell:
Chegg (CHGG)
Net Cash Position: $27.13 million (34% of Market Cap)
Started as a physical textbook rental service, Chegg (NYSE: CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.
Why Do We Pass on CHGG?
- Intense competition is diverting traffic from its platform as its services subscribers fell by 27% annually
- Inability to adjust its cost structure while its revenue declined over the last few years led to a 13.5 percentage point drop in the company’s EBITDA margin
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
Chegg’s stock price of $0.72 implies a valuation ratio of 2.6x forward EV/EBITDA. To fully understand why you should be careful with CHGG, check out our full research report (it’s free).
PACCAR (PCAR)
Net Cash Position: $8.67 billion (14.7% 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 Does PCAR Fall Short?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 11.2% annually over the last two years
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
PACCAR is trading at $111.80 per share, or 16.8x forward P/E. Check out our free in-depth research report to learn more about why PCAR doesn’t pass our bar.
One Stock to Buy:
Watts Water Technologies (WTS)
Net Cash Position: $239.9 million (2% of Market Cap)
Founded in 1874, Watts Water (NYSE: WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Are We Bullish on WTS?
- Solid 9.9% annual revenue growth over the last five years indicates its offerings solve complex business issues
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin jumped by 6.5 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $358.14 per share, Watts Water Technologies trades at 26.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
