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 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:
GameStop (GME)
Net Cash Position: $4.36 billion (36% of Market Cap)
Drawing gaming fans with demo units set up with the latest releases, GameStop (NYSE: GME) sells new and used video games, consoles, and accessories, as well as pop culture merchandise.
Why Is GME Risky?
- Products have few die-hard fans as sales have declined by 10% annually over the last five years
- Operating margin of -0.6% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Negative returns on capital show management lost money while trying to expand the business
At $27.07 per share, GameStop trades at 3.2x forward price-to-sales. Read our free research report to see why you should think twice about including GME in your portfolio.
Hudson Technologies (HDSN)
Net Cash Position: $65.22 million (27.9% of Market Cap)
Founded in 1991, Hudson Technologies (NASDAQ: HDSN) specializes in refrigerant services and solutions, providing refrigerant sales, reclamation, and recycling.
Why Is HDSN Not Exciting?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 14.6% annually over the last two years
- Projected sales decline of 4.1% over the next 12 months indicates demand will continue deteriorating
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
Hudson Technologies’s stock price of $5.12 implies a valuation ratio of 13.6x forward price-to-earnings. To fully understand why you should be careful with HDSN, check out our full research report (it’s free).
One Stock to Buy:
Sterling (STRL)
Net Cash Position: $294.9 million (6.9% of Market Cap)
Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ: STRL) provides civil infrastructure construction.
Why Are We Bullish on STRL?
- Annual revenue growth of 13.4% over the past five years was outstanding, reflecting market share gains this cycle
- Free cash flow margin grew by 13.5 percentage points over the last five years, giving the company more chips to play with
- Returns on capital are growing as management capitalizes on its market opportunities
Sterling is trading at $139.66 per share, or 21.6x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even 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 6 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 Comfort Systems (+751% five-year return). Find your next big winner with StockStory today for free.
