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.
Not all businesses with cash are winners, and that’s why we built StockStory - to help you separate the good from the bad. Keeping that in mind, here is one company with a net cash position that balances growth with stability and two best left off your watchlist.
Two Stocks to Sell:
Teradyne (TER)
Net Cash Position: $238.8 million (0.6% of Market Cap)
Sporting most major chip manufacturers as its customers, Teradyne (NASDAQ:TER) is a US-based supplier of automated test equipment for semiconductors as well as other technologies and devices.
Why Do We Think Twice About TER?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last five years
- Sales over the last five years were less profitable as its earnings per share fell by 2.9% annually while its revenue was flat
- Free cash flow margin dropped by 12 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Teradyne is trading at $263.95 per share, or 43.2x forward P/E. Dive into our free research report to see why there are better opportunities than TER.
Dolby Laboratories (DLB)
Net Cash Position: $687.7 million (11.3% of Market Cap)
Known for its iconic "D" logo that appears before countless movies and TV shows, Dolby Laboratories (NYSE:DLB) designs and licenses audio and video technologies that enhance entertainment experiences in movies, TV shows, music, and other media.
Why Do We Steer Clear of DLB?
- Muted 1.2% annual revenue growth over the last five years shows its demand lagged behind its software peers
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 2.2 percentage points
Dolby Laboratories’s stock price of $63.60 implies a valuation ratio of 4.4x forward price-to-sales. Check out our free in-depth research report to learn more about why DLB doesn’t pass our bar.
One Stock to Watch:
Rumble (RUM)
Net Cash Position: $267.5 million (14.7% of Market Cap)
Founded in 2013 as a champion for content creator rights and free expression, Rumble (NASDAQ:RUM) is a video sharing platform that positions itself as a free speech alternative to mainstream platforms, offering creators more favorable revenue-sharing opportunities.
Why Do We Watch RUM?
- Annual revenue growth of 85.5% over the last four years was superb and indicates its market share increased during this cycle
- Exciting sales outlook for the upcoming 12 months calls for 202% growth, an acceleration from its two-year trend
At $5.38 per share, Rumble trades at 29.3x forward EV-to-EBITDA. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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