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 is one company with a net cash position that can continue growing sustainably and two that may struggle.
Two Stocks to Sell:
Byrna (BYRN)
Net Cash Position: $7.44 million (5.2% of Market Cap)
Providing civilians with tools to disable, disarm, and deter would-be assailants, Byrna (NASDAQ: BYRN) is a provider of non-lethal weapons.
Why Are We Hesitant About BYRN?
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
- Negative returns on capital show management lost money while trying to expand the business
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Byrna is trading at $6.33 per share, or 20.5x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than BYRN.
ePlus (PLUS)
Net Cash Position: $193.1 million (9% of Market Cap)
Starting as a financing company in 1990 before evolving into a full-service technology provider, ePlus (NASDAQ: PLUS) provides comprehensive IT solutions, professional services, and financing options to help organizations optimize their technology infrastructure and supply chain processes.
Why Are We Wary of PLUS?
- Annual revenue growth of 4.4% over the last two years was below our standards for the business services sector
- Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew
- Poor free cash flow margin of 3.5% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
ePlus’s stock price of $82.32 implies a valuation ratio of 15.5x forward P/E. To fully understand why you should be careful with PLUS, check out our full research report (it’s free).
One Stock to Buy:
Fluence Energy (FLNC)
Net Cash Position: $77.15 million (3.9% of Market Cap)
Pioneering the use of lithium-ion batteries for grid storage, Fluence (NASDAQ: FLNC) helps store renewable energy sources with battery systems.
Why Are We Backing FLNC?
- Annual revenue growth of 33.8% over the past five years was outstanding, reflecting market share gains this cycle
- Earnings per share grew by 36.4% annually over the last four years and trumped its peers
- Negative free cash flow margin has improved over the last five years, showing the company is one step closer to financial self-sufficiency
At $15.06 per share, Fluence Energy trades at 318.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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