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.
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 avoid and some better alternatives instead.
Movado (MOV)
Net Cash Position: $102 million (18.5% of Market Cap)
With its watches displayed in 20 museums around the world, Movado (NYSE: MOV) is a watchmaking company with a portfolio of watch brands and accessories.
Why Do We Steer Clear of MOV?
- 4.7% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $23.81 per share, Movado trades at 15.1x forward P/E. Check out our free in-depth research report to learn more about why MOV doesn’t pass our bar.
Artisan Partners (APAM)
Net Cash Position: $4.61 million (0.2% of Market Cap)
Founded in 1994 with a focus on autonomous investment teams and a "high-value-added" approach, Artisan Partners (NYSE: APAM) is an investment management firm that offers actively managed equity and fixed income strategies to institutional and individual investors.
Why Is APAM Not Exciting?
- Sales trends were unexciting over the last five years as its 5.9% annual growth was below the typical financials company
- Incremental sales over the last five years were less profitable as its 3.4% annual earnings per share growth lagged its revenue gains
Artisan Partners is trading at $40.50 per share, or 9.7x forward P/E. Dive into our free research report to see why there are better opportunities than APAM.
FirstSun Capital Bancorp (FSUN)
Net Cash Position: $604.8 million (57.2% of Market Cap)
Tracing its roots back to 1892 when it first opened its doors in Kansas, FirstSun Capital Bancorp (NASDAQ: FSUN) operates Sunflower Bank, providing commercial and consumer banking services to businesses and individuals across the Southwest region.
Why Are We Wary of FSUN?
- Sales trends were unexciting over the last two years as its 5.5% annual growth was below the typical banking company
- Net interest margin shrank by 20.8 basis points (100 basis points = 1 percentage point) over the last two years, suggesting the profitability of its loan book is decreasing or the market is becoming more competitive
- Forecasted tangible book value per share decline of 3.3% for the upcoming 12 months implies profitability will deteriorate significantly
FirstSun Capital Bancorp’s stock price of $37.93 implies a valuation ratio of 0.9x forward P/B. If you’re considering FSUN for your portfolio, see our FREE research report to learn more.
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