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.
Just because a business has cash doesn’t mean it’s a good investment. Luckily, StockStory is here to help you separate the winners from the losers. That said, here are three companies with net cash positions to avoid and some better alternatives instead.
Roku (ROKU)
Net Cash Position: $1.76 billion (20% of Market Cap)
Spun out from Netflix, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.
Why Are We Hesitant About ROKU?
- Focus on expanding its platform came at the expense of monetization as its average revenue per user fell by 1.4% annually
- Day-to-day expenses have swelled relative to revenue over the last few years as its EBITDA margin fell by 7.1 percentage points
- Incremental sales over the last three years were much less profitable as its earnings per share fell by 34.6% annually while its revenue grew
Roku is trading at $59.98 per share, or 24x forward EV/EBITDA. To fully understand why you should be careful with ROKU, check out our full research report (it’s free).
Vicor (VICR)
Net Cash Position: $289.1 million (15.6% of Market Cap)
Founded by a researcher at the Massachusetts Institute of Technology, Vicor (NASDAQ: VICR) provides electrical power conversion and delivery products for a range of industries.
Why Does VICR Worry Us?
- Annual sales declines of 5% for the past two years show its products and services struggled to connect with the market during this cycle
- Performance over the past two years was negatively impacted by new share issuances as its earnings per share dropped by 12.9% annually, worse than its revenue
- Waning returns on capital imply its previous profit engines are losing steam
At $42 per share, Vicor trades at 25.6x forward P/E. Check out our free in-depth research report to learn more about why VICR doesn’t pass our bar.
Boise Cascade (BCC)
Net Cash Position: $35.16 million (1.1% of Market Cap)
Formed through the merger of two lumber companies, Boise Cascade Company (NYSE: BCC) manufactures and distributes wood products and other building materials.
Why Should You Sell BCC?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 6.7% annually over the last two years
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- Eroding returns on capital suggest its historical profit centers are aging
Boise Cascade’s stock price of $87.10 implies a valuation ratio of 10.3x forward P/E. Dive into our free research report to see why there are better opportunities than BCC.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
