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.
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 is one company with a net cash position that balances growth with stability and two that may struggle.
Two Stocks to Sell:
Columbia Sportswear (COLM)
Net Cash Position: $62.79 million (1.8% of Market Cap)
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ: COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Why Should You Dump COLM?
- Lackluster 5.8% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 6.9% for the last two years
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $63.86 per share, Columbia Sportswear trades at 16.3x forward P/E. If you’re considering COLM for your portfolio, see our FREE research report to learn more.
STAAR Surgical (STAA)
Net Cash Position: $94.57 million (6.6% of Market Cap)
With over 2.5 million implants performed worldwide, STAAR Surgical (NASDAQ: STAA) designs and manufactures implantable lenses that correct vision problems without removing the eye's natural lens.
Why Should You Sell STAA?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5.7% annually over the last two years
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 26.6 percentage points
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
STAAR Surgical is trading at $31.25 per share, or 38x forward P/E. Check out our free in-depth research report to learn more about why STAA doesn’t pass our bar.
One Stock to Watch:
IonQ (IONQ)
Net Cash Position: $2.00 billion (9.3% of Market Cap)
Founded by quantum physics pioneers from the University of Maryland and Duke University in 2015, IonQ (NYSE: IONQ) develops quantum computers that process information using trapped ions to solve complex computational problems beyond the capabilities of traditional computers.
Why Could IONQ Be a Winner?
- Annual revenue growth of 172% over the last two years was superb and indicates its market share increased during this cycle
- Notable projected revenue growth of 53.2% for the next 12 months hints at market share gains
- Adjusted operating margin improvement of 707.5 percentage points over the last five years demonstrates its ability to scale efficiently
IonQ’s stock price of $50.41 implies a valuation ratio of 69.4x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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