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 can leverage its balance sheet to grow and two that may struggle.
Two Stocks to Sell:
Graco (GGG)
Net Cash Position: $493.7 million (3.6% of Market Cap)
Founded in 1926, Graco (NYSE: GGG) is an industrial company specializing in the development and manufacturing of fluid-handling systems and products.
Why Does GGG Fall Short?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Flat earnings per share over the last two years lagged its peers
- Diminishing returns on capital suggest its earlier profit pools are drying up
Graco is trading at $81.68 per share, or 27x forward P/E. If you’re considering GGG for your portfolio, see our FREE research report to learn more.
Matrix Service (MTRX)
Net Cash Position: $134.8 million (40.3% of Market Cap)
Founded in Oklahoma, Matrix Service (NASDAQ: MTRX) provides engineering, fabrication, construction, and maintenance services primarily to the energy and industrial markets.
Why Do We Think MTRX Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 12.9% annually over the last five years
- High input costs result in an inferior gross margin of 4.4% that must be offset through higher volumes
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share dropped by 22.5% annually, worse than its revenue
Matrix Service’s stock price of $11.79 implies a valuation ratio of 17.7x forward P/E. Dive into our free research report to see why there are better opportunities than MTRX.
One Stock to Buy:
GitLab (GTLB)
Net Cash Position: $992.4 million (12.9% of Market Cap)
Founded as an open-source project in 2011, GitLab (NASDAQ: GTLB) is a leading software development tools platform.
Why Will GTLB Outperform?
- Ability to secure long-term commitments with customers is evident in its 33.5% ARR growth over the last year
- Customers use its software daily and increase their spending every year, as seen in its 126% net revenue retention rate
- Prominent and differentiated software results in a best-in-class gross margin of 88.8%
At $45.29 per share, GitLab trades at 8.5x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
