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.
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 are two companies with net cash positions that can continue growing sustainably and one with hidden risks.
One Stock to Sell:
Medifast (MED)
Net Cash Position: $149.6 million (120% of Market Cap)
Known for its Optavia program that combines portion-controlled meal replacements with coaching, Medifast (NYSE: MED) has a broad product portfolio of bars, snacks, drinks, and desserts for those looking to lose weight or consume healthier foods.
Why Should You Sell MED?
- Sales tumbled by 33.9% annually over the last three years, showing consumer trends are working against its favor
- Earnings per share decreased by more than its revenue over the last three years, showing each sale was less profitable
- Free cash flow margin dropped by 7.6 percentage points over the last year, implying the company became more capital intensive as competition picked up
At $12.18 per share, Medifast trades at 0.4x forward price-to-sales. To fully understand why you should be careful with MED, check out our full research report (it’s free for active Edge members).
Two Stocks to Buy:
Palomar Holdings (PLMR)
Net Cash Position: $81.3 million (2.7% of Market Cap)
Founded in 2013 to fill gaps in catastrophe insurance markets, Palomar Holdings (NASDAQ: PLMR) is a specialty insurance provider that offers property and casualty insurance products in underserved markets, with a focus on earthquake coverage.
Why Is PLMR a Good Business?
- Strong 38.3% annualized net premiums earned expansion over the last two years shows it’s capturing market share this cycle
- Annual book value per share growth of 37.7% over the past two years was outstanding, reflecting strong capital accumulation this cycle
- Capital strength will likely rise over the next 12 months as its expected book value per share growth of 24.6% is robust
Palomar Holdings’s stock price of $113.40 implies a valuation ratio of 3.2x forward P/B. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
1st Source (SRCE)
Net Cash Position: $21.21 million (1.5% of Market Cap)
Tracing its roots back to 1863 during the Civil War era, 1st Source Corporation (NASDAQ: SRCE) is a regional bank holding company that provides commercial, consumer, specialty finance, and wealth management services across Indiana, Michigan, and Florida.
Why Are We Backing SRCE?
- Net interest margin expanded by 48.7 basis points (100 basis points = 1 percentage point) over the last two years, providing additional flexibility for investments
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 11.3% outpaced its revenue gains
- Balance sheet strength has increased this cycle as its 8.7% annual tangible book value per share growth over the last five years was exceptional
1st Source is trading at $59.09 per share, or 1.1x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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