1 Cash-Heavy Stock to Own for Decades and 2 We Find Risky
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.
“
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.
“
“
“
“
Net Cash Position: $44.65 million (2.3% of Market Cap)
“
Formed through the merger of Strayer Education and Capella Education in 2018, Strategic Education (NASDAQ:STRA) is a career-focused higher education provider.
“
Why Do We Think STRA Will Underperform?
“
-
Performance surrounding its domestic students has lagged its peers
-
Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 7.1% annually
-
Underwhelming 3.7% return on capital reflects management’s difficulties in finding profitable growth opportunities
“
“
Strategic Education is trading at $81.43 per share, or 13.4x forward P/E. Dive into our free research report to see why there are better opportunities than STRA.
“
“
Net Cash Position: $19.53 million (13.8% of Market Cap)
“
One of the first EV charging companies to go public, Blink Charging (NASDAQ:BLNK) is a manufacturer, owner, operator, and provider of electric vehicle charging equipment and networked EV charging services.
“
Why Does BLNK Fall Short?
“
-
Sales trends were unexciting over the last two years as its 5.4% annual growth was below the typical industrials company
-
Negative free cash flow raises questions about the return timeline for its investments
-
Short cash runway increases the probability of a capital raise that dilutes existing shareholders
“
“
At $1.36 per share, Blink Charging trades at 1.1x forward price-to-sales. Read our free research report to see why you should think twice about including BLNK in your portfolio, it’s free.
“
“
“
Net Cash Position: $461 million (0.4% of Market Cap)
“
With a mission to democratize finance, Robinhood (NASDAQ:HOOD) is an online consumer finance platform known for its commission-free stock and crypto trading.
“
Why Do We Love HOOD?
“
-
Customer spending is rising as the company has focused on monetization over the last two years, leading to 40.9% annual growth in its average revenue per user
-
Additional sales over the last three years increased its profitability as the 54.6% annual growth in its earnings per share outpaced its revenue
-
Strong free cash flow margin of 67% enables it to reinvest or return capital consistently, and its rising cash conversion increases its margin of safety