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.
Nature's Sunshine (NATR)
Net Cash Position: $81.27 million (21.3% 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?
- Lackluster 2.8% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Subscale operations are evident in its revenue base of $474.5 million, meaning it has fewer distribution channels than its larger rivals
- Anticipated sales growth of 3.1% for the next year implies demand will be shaky
At $21.84 per share, Nature's Sunshine trades at 23.3x forward P/E. If you’re considering NATR for your portfolio, see our FREE research report to learn more.
Pinnacle Financial Partners (PNFP)
Net Cash Position: $773.4 million (10.1% of Market Cap)
Founded in 2000 with a focus on delivering big-bank capabilities with community bank personalization, Pinnacle Financial Partners (NASDAQ:PNFP) is a Tennessee-based financial holding company that provides banking, investment, trust, mortgage, and insurance services to businesses and individuals.
Why Are We Hesitant About PNFP?
- Net interest margin of 3.2% is well below other banks, signaling its loans aren’t very profitable
- Costs have risen faster than its revenue over the last four years, causing its efficiency ratio to worsen by 7.8 percentage points
- Estimated tangible book value per share growth of 1.8% for the next 12 months implies profitability will slow from its two-year trend
Pinnacle Financial Partners is trading at $99.93 per share, or 1.1x forward P/B. Dive into our free research report to see why there are better opportunities than PNFP.
FB Financial (FBK)
Net Cash Position: $928.1 million (29.6% of Market Cap)
Founded in 1906 and operating through more than a century of economic cycles, FB Financial (NYSE:FBK) operates FirstBank, providing commercial and consumer banking services across Tennessee, Kentucky, Alabama, and North Georgia.
Why Does FBK Fall Short?
- Annual revenue growth of 3.1% over the last five years was below our standards for the banking sector
- Earnings per share lagged its peers over the last five years as they only grew by 3.5% annually
- Low return on equity reflects management’s struggle to allocate funds effectively
FB Financial’s stock price of $58.70 implies a valuation ratio of 1.5x forward P/B. Check out our free in-depth research report to learn more about why FBK doesn’t pass our bar.
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