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 are three companies with net cash positions to steer clear of and a few alternatives to consider.
fuboTV (FUBO)
Net Cash Position: $44.91 million (5.2% of Market Cap)
Originally launched as a soccer streaming platform, fuboTV (NYSE:FUBO) is a video streaming service specializing in live sports, news, and entertainment content.
Why Is FUBO Risky?
- Demand for its offerings was relatively low as its number of domestic subscribers has underwhelmed
- Poor expense management has led to operating margin losses
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $2.51 per share, fuboTV trades at 84.3x forward P/E. Read our free research report to see why you should think twice about including FUBO in your portfolio.
Penumbra (PEN)
Net Cash Position: $253.3 million (2% of Market Cap)
Founded in 2004 to address challenging medical conditions with significant unmet needs, Penumbra (NYSE:PEN) develops and manufactures innovative medical devices for treating vascular diseases and providing immersive healthcare rehabilitation solutions.
Why Is PEN Not Exciting?
- Revenue base of $1.33 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Low free cash flow margin of 4.8% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Low returns on capital reflect management’s struggle to allocate funds effectively
Penumbra is trading at $317.03 per share, or 67.2x forward P/E. Dive into our free research report to see why there are better opportunities than PEN.
Stifel (SF)
Net Cash Position: $1.69 billion (12.5% of Market Cap)
Tracing its roots back to 1890 when the firm was established in St. Louis, Stifel Financial (NYSE:SF) is a financial services firm that provides wealth management, investment banking, and institutional brokerage services to individuals, corporations, and institutions.
Why Are We Wary of SF?
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 9% annually
- Capital trends were unexciting over the last two years as its 6.1% annual book value per share growth was below the typical financials firm
Stifel’s stock price of $133.22 implies a valuation ratio of 14.2x forward P/E. Check out our free in-depth research report to learn more about why SF doesn’t pass our bar.
Stocks We Like More
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