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.
Financial flexibility is valuable, but it’s not everything - at StockStory, we help you find the stocks that can not only survive but also outperform. That said, here is one company with a net cash position that balances growth with stability and two that may struggle.
Two Stocks to Sell:
Paycom (PAYC)
Net Cash Position: $451 million (4% of Market Cap)
Pioneering the concept of employees doing their own payroll with its "Beti" technology, Paycom (NYSE: PAYC) provides cloud-based human capital management software that helps businesses manage the entire employment lifecycle from recruitment to retirement.
Why Are We Wary of PAYC?
- Offerings struggled to generate meaningful interest as its average billings growth of 9.7% over the last year did not impress
- Estimated sales growth of 9.4% for the next 12 months implies demand will slow from its two-year trend
- Efficiency has decreased over the last year as its operating margin fell by 4.8 percentage points
Paycom’s stock price of $200.60 implies a valuation ratio of 5.3x forward price-to-sales. Check out our free in-depth research report to learn more about why PAYC doesn’t pass our bar.
The Real Brokerage (REAX)
Net Cash Position: $54.77 million (6.7% of Market Cap)
Founded in Toronto, Canada in 2014, The Real Brokerage (NASDAQ: REAX) is a technology-driven real estate brokerage firm combining a tech-centric model with an agent-centric philosophy.
Why Are We Out on REAX?
- Poor expense management has led to operating margin losses
- Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 1.9 percentage points over the next year
The Real Brokerage is trading at $3.93 per share, or 15.3x forward EV-to-EBITDA. If you’re considering REAX for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Columbia Banking System (COLB)
Net Cash Position: $1.20 billion (15.6% of Market Cap)
Created through the merger of two Pacific Northwest banking institutions with deep regional roots, Columbia Banking System (NASDAQ: COLB) operates Umpqua Bank, providing commercial, consumer, and wealth management services across eight western states.
Why Are We Positive On COLB?
- Annual net interest income growth of 15.1% over the past five years was outstanding, reflecting market share gains this cycle
- Projected net interest income growth of 38.4% for the next 12 months is above its five-year trend, pointing to accelerating demand
- Additional sales over the last five years increased its profitability as the 13.3% annual growth in its earnings per share outpaced its revenue
At $25.92 per share, Columbia Banking System trades at 1x forward P/B. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
High-Quality Stocks for All Market Conditions
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