A surplus of cash can mean financial stability, but it can also indicate a reluctance (or inability) to invest in growth. Some of these companies also face challenges like stagnating revenue, declining market share, or limited scalability.
Not all businesses with cash are winners, and that’s why we built StockStory - to help you separate the good from the bad. Keeping that in mind, here are two companies with net cash positions that balance growth with stability and one best left off your watchlist.
One Stock to Sell:
The Marzetti Company (MZTI)
Net Cash Position: $118.8 million (2.4% of Market Cap)
Known for its frozen garlic bread and Parkerhouse rolls, The Marzetti Company (NASDAQ: MZTI) sells bread, dressing, and dips to the retail and food service channels.
Why Are We Hesitant About MZTI?
- Lackluster 4.4% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Subscale operations are evident in its revenue base of $1.91 billion, meaning it has fewer distribution channels than its larger rivals
- Estimated sales growth of 1.6% for the next 12 months implies demand will slow from its three-year trend
The Marzetti Company’s stock price of $181.45 implies a valuation ratio of 25.3x forward P/E. Check out our free in-depth research report to learn more about why MZTI doesn’t pass our bar.
Two Stocks to Watch:
Natera (NTRA)
Net Cash Position: $832.9 million (3.7% of Market Cap)
Founded in 2003 as Gene Security Network before rebranding in 2012, Natera (NASDAQ: NTRA) develops and commercializes genetic tests for prenatal screening, cancer detection, and organ transplant monitoring using its proprietary cell-free DNA technology.
Why Will NTRA Beat the Market?
- Products are reaching more customers as its tests processed averaged 21% growth over the past two years
- Adjusted operating profits increased over the last two years as the company gained some leverage on its fixed costs and became more efficient
- Free cash flow margin is now positive, indicating the company has achieved financial self-sustainability
Natera is trading at $165.75 per share, or 10.2x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
Lantheus (LNTH)
Net Cash Position: $127.9 million (3.4% of Market Cap)
Pioneering the "Find, Fight and Follow" approach to disease management, Lantheus Holdings (NASDAQGM:LNTH) develops and commercializes radiopharmaceuticals and other imaging agents that help healthcare professionals detect, diagnose, and treat diseases.
Why Are We Fans of LNTH?
- Market share has increased this cycle as its 35.6% annual revenue growth over the last five years was exceptional
- Free cash flow margin grew by 22.9 percentage points over the last five years, giving the company more chips to play with
- Improving returns on capital reflect management’s ability to monetize investments
At $56.79 per share, Lantheus trades at 8.3x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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