A surplus of cash can mean financial stability, but it can also indicate a reluctance (or inability) to invest in growth. Some of these companies also face challenges like stagnating revenue, declining market share, or limited scalability.
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 are two companies with net cash positions that balance growth with stability and one that may struggle.
One Stock to Sell:
United Community Banks (UCB)
Net Cash Position: $458.2 million (12.5% of Market Cap)
Starting as a small community bank in 1950 and expanding through strategic acquisitions across the Southeast, United Community Banks (NYSE: UCB) is a regional bank holding company that provides financial services including loans, deposits, wealth management, and merchant services across the southeastern United States.
Why Is UCB Not Exciting?
- 4.1% annual revenue growth over the last two years was slower than its banking peers
- Inferior net interest margin of 3.4% means it must compensate for lower profitability through increased loan originations
- Muted 4.7% annual tangible book value per share growth over the last five years shows its capital generation lagged behind its banking peers
United Community Banks is trading at $30.27 per share, or 1x forward P/B. Check out our free in-depth research report to learn more about why UCB doesn’t pass our bar.
Two Stocks to Buy:
AMD (AMD)
Net Cash Position: $4.02 billion (1% of Market Cap)
Founded in 1969 by a group of former Fairchild semiconductor executives led by Jerry Sanders, Advanced Micro Devices (NASDAQ: AMD) is one of the leading designers of computer processors and graphics chips used in PCs and data centers.
Why Is AMD a Good Business?
- Annual revenue growth of 29.9% over the past five years was outstanding, reflecting market share gains this cycle
- Exciting sales outlook for the upcoming 12 months calls for 27% growth, an acceleration from its two-year trend
- Earnings per share grew by 27.9% annually over the last five years and trumped its peers
AMD’s stock price of $248.81 implies a valuation ratio of 42.8x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Samsara (IOT)
Net Cash Position: $624.6 million (2.7% of Market Cap)
From sensors on vehicles to AI-powered cameras that help prevent accidents, Samsara (NYSE: IOT) is a cloud-based Internet of Things platform that helps businesses improve the safety, efficiency, and sustainability of their physical operations.
Why Is IOT a Top Pick?
- Ability to secure long-term commitments with customers is evident in its 31.8% ARR growth over the last year
- Estimated revenue growth of 21.2% for the next 12 months implies its momentum over the last two years will continue
- Fast payback periods on sales and marketing expenses allow the company to invest heavily and onboard many customers concurrently
At $39.06 per share, Samsara trades at 13.2x forward price-to-sales. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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