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.
Not all businesses with cash are winners, and that’s why we built StockStory - to help you separate the good from the bad. That said, here are three companies with net cash positions to steer clear of and a few alternatives to consider.
DoubleVerify (DV)
Net Cash Position: $78.26 million (5% of Market Cap)
Using advanced analytics to evaluate over 17 billion digital ad transactions daily, DoubleVerify (NYSE: DV) provides AI-powered technology that verifies digital ads are viewable, fraud-free, brand-suitable, and displayed in the intended geographic location.
Why Do We Pass on DV?
- Annual revenue growth of 13.7% over the last two years was below our standards for the software sector
- Extended payback periods on sales investments suggest the company’s platform isn’t resonating enough to drive efficient sales conversions
- Operating margin failed to increase over the last year, indicating the company couldn’t optimize its expenses
DoubleVerify is trading at $11.27 per share, or 2.2x forward price-to-sales. To fully understand why you should be careful with DV, check out our full research report (it’s free).
FB Financial (FBK)
Net Cash Position: $819.6 million (29.4% of Market Cap)
Founded in 1906 and operating through more than a century of economic cycles, FB Financial (NYSE: FBK) operates FirstBank, providing commercial and consumer banking services across Tennessee, Kentucky, Alabama, and North Georgia.
Why Is FBK Not Exciting?
- 1.4% annual revenue growth over the last five years was slower than its banking peers
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 1.1% annually while its revenue grew
- Annual tangible book value per share growth of 8.8% over the last two years was below our standards for the banking sector
At $56 per share, FB Financial trades at 1.4x forward P/B. If you’re considering FBK for your portfolio, see our FREE research report to learn more.
Cathay General Bancorp (CATY)
Net Cash Position: $2.09 billion (51.9% of Market Cap)
Founded in 1962 with its first branch in Los Angeles' Chinatown, Cathay General Bancorp (NASDAQ: CATY) operates Cathay Bank, providing commercial banking services to businesses and individuals with a strong presence in Asian-American communities.
Why Does CATY Fall Short?
- Annual revenue growth of 3.7% over the last two years was below our standards for the banking sector
- 6.5% annual net interest income growth over the last five years was slower than its banking peers
- Performance over the past two years shows its incremental sales were less profitable, as its 1.1% annual earnings per share growth trailed its revenue gains
Cathay General Bancorp’s stock price of $60.27 implies a valuation ratio of 1.3x forward P/B. Read our free research report to see why you should think twice about including CATY in your portfolio.
Stocks We Like More
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