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 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:

Magnachip (MX)

Net Cash Position: $73.86 million (70.2% of Market Cap)

With its technology found in common consumer electronics such as TVs and smartphones, Magnachip Semiconductor (NYSE: MX) is a provider of analog and mixed-signal semiconductors.

Why Do We Think MX Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 16.3% annually over the last five years
2. Free cash flow margin dropped by 11.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

At $2.93 per share, Magnachip trades at 0.6x forward price-to-sales. Read our free research report to see why you should think twice about including MX in your portfolio.

Tesla (TSLA)

Net Cash Position: $29.56 billion (2.8% of Market Cap)

Originally founded by Martin Eberhard and Marc Tarpenning in 2003, Tesla (NASDAQ: TSLA) is an electric vehicle company accelerating the world’s transition to sustainable energy.

Why Do We Steer Clear of TSLA?

1. Tesla's scale advantage in EV production leads to gross margins that exceed incumbents such as General Motors and Ford. However, a softer macroeconomic backdrop and tariff pressures have weighed on automobile sales, which are highly cyclical.
2. The company's execution ability is a question mark given its long history of delays, such as the Cybertruck and Robotaxi launches. Its sizeable investments in projects with uncertain return timelines, like Optimus, also raise skepticism from investors.
3. On the bright side, Tesla's Megapack product solves a critical problem for utilities needing renewable energy storage solutions. This innovation has made the energy segment the most profitable and fastest-growing business line for the company.

Tesla’s stock price of $330.15 implies a valuation ratio of 157.2x forward price-to-earnings. If you’re considering TSLA for your portfolio, see our FREE research report to learn more.

One Stock to Watch:

Preferred Bank (PFBC)

Net Cash Position: $424.6 million (37.3% of Market Cap)

Founded in 1991 with a focus on serving the Pacific Rim community in Southern California, Preferred Bank (NASDAQ: PFBC) is a commercial bank that provides banking products and services to small and mid-sized businesses, entrepreneurs, real estate developers, and high net worth individuals.

Why Are We Positive On PFBC?

1. Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
2. Annual tangible book value per share growth of 12.9% over the past five years was outstanding, reflecting strong capital accumulation this cycle
3. Industry-leading 19% return on equity demonstrates management’s skill in finding high-return investments

Preferred Bank is trading at $91.61 per share, or 1.5x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at 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 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-micro-cap company Tecnoglass (+1,754% 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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