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.
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 are three companies with net cash positions to avoid and some better alternatives instead.
Cal-Maine (CALM)
Net Cash Position: $1.14 billion (30% of Market Cap)
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ: CALM) produces, packages, and distributes eggs.
Why Does CALM Give Us Pause?
- Sales trends were unexciting over the last three years as its 4.3% annual growth was below the typical consumer staples company
- Estimated sales decline of 22.2% for the next 12 months implies a challenging demand environment
- Efficiency has decreased over the last year as its operating margin fell by 8.1 percentage points
Cal-Maine is trading at $79.45 per share, or 23.5x forward P/E. If you’re considering CALM for your portfolio, see our FREE research report to learn more.
Nature's Sunshine (NATR)
Net Cash Position: $65.15 million (18.2% of Market Cap)
Started on a kitchen table in Utah, Nature’s Sunshine (NASDAQ: NATR) manufactures and sells nutritional and personal care products.
Why Is NATR Not Exciting?
- 5.3% annual revenue growth over the last three years was slower than its consumer staples peers
- Subscale operations are evident in its revenue base of $489.8 million, meaning it has fewer distribution channels than its larger rivals
- Subpar operating margin of 5.3% constrains its ability to invest in process improvements or effectively respond to new competitive threats
Nature's Sunshine’s stock price of $20.84 implies a valuation ratio of 17x forward P/E. To fully understand why you should be careful with NATR, check out our full research report (it’s free).
Texas Capital Bank (TCBI)
Net Cash Position: $1.78 billion (40.7% of Market Cap)
Founded during the Texas banking renaissance of the 1990s with an entrepreneurial spirit, Texas Capital Bancshares (NASDAQ: TCBI) is a financial services firm that provides banking, wealth management, and investment banking services to businesses and individuals across Texas and beyond.
Why Do We Think Twice About TCBI?
- Annual net interest income growth of 5.1% over the last five years was below our standards for the banking sector
- Estimated net interest income growth of 3% for the next 12 months implies demand will slow from its five-year trend
- Low return on equity reflects management’s struggle to allocate funds effectively
At $103.05 per share, Texas Capital Bank trades at 1.2x forward P/B. Read our free research report to see why you should think twice about including TCBI in your portfolio.
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