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 is one company with a net cash position that can leverage its balance sheet to grow and two with hidden risks.
Two Stocks to Sell:
Enphase (ENPH)
Net Cash Position: $308.5 million (5.2% of Market Cap)
The first company to successfully commercialize the solar micro-inverter, Enphase (NASDAQ:ENPH) manufactures software-driven home energy products.
Why Should You Sell ENPH?
- Declining unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Earnings per share have contracted by 17.7% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 15.2 percentage points
Enphase is trading at $45.78 per share, or 19.9x forward P/E. Read our free research report to see why you should think twice about including ENPH in your portfolio.
Stellar Bancorp (STEL)
Net Cash Position: $379.2 million (19.4% of Market Cap)
Created through strategic mergers to serve the growing Texas business community, Stellar Bancorp (NYSE:STEL) is a Texas bank holding company that provides commercial banking services primarily to small and medium-sized businesses and professionals.
Why Do We Pass on STEL?
- Sales tumbled by 4.2% annually over the last two years, showing market trends are working against its favor during this cycle
- Net interest margin shrank by 35.6 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
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
At $38.54 per share, Stellar Bancorp trades at 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than STEL.
One Stock to Buy:
Palomar Holdings (PLMR)
Net Cash Position: $106.9 million (3.1% of Market Cap)
Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ:PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.
Why Are We Backing PLMR?
- Net premiums earned expanded by 52.3% annually over the last two years, demonstrating exceptional market penetration this cycle
- Balance sheet strength has increased this cycle as its 36.7% annual book value per share growth over the last two years was exceptional
- Capital strength will likely rise over the next 12 months as its expected book value per share growth of 26.4% is robust
Palomar Holdings’s stock price of $130.10 implies a valuation ratio of 3x forward P/B. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.