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.

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 three companies with net cash positions to steer clear of and a few alternatives to consider.

Landstar (LSTR)

Net Cash Position: $357.3 million (8.2% of Market Cap)

Covering billions of miles throughout North America, Landstar (NASDAQ: LSTR) is a transportation company specializing in freight and last-mile delivery services.

Why Do We Steer Clear of LSTR?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 8.9% annually over the last two years
2. Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
3. Diminishing returns on capital suggest its earlier profit pools are drying up

At $126.64 per share, Landstar trades at 24.4x forward P/E. Check out our free in-depth research report to learn more about why LSTR doesn’t pass our bar.

Tutor Perini (TPC)

Net Cash Position: $507.4 million (15.8% of Market Cap)

Known for constructing the Philadelphia Eagles’ Stadium, Tutor Perini (NYSE: TPC) is a civil and building construction company offering diversified general contracting and design-build services.

Why Do We Think Twice About TPC?

1. Sales were flat over the last five years, indicating it’s failed to expand this cycle
2. Gross margin of 6.7% is below its competitors, leaving less money to invest in areas like marketing and R&D
3. Performance over the past five years was negatively impacted by new share issuances as its earnings per share fell by 18.8% annually while its revenue was flat

Tutor Perini is trading at $60.90 per share, or 13.8x forward P/E. Dive into our free research report to see why there are better opportunities than TPC.

NVR (NVR)

Net Cash Position: $973.4 million (4.6% of Market Cap)

Known for its unique land acquisition strategy, NVR (NYSE: NVR) is a respected homebuilder and mortgage company in the United States.

Why Is NVR Not Exciting?

1. Sales pipeline suggests its future revenue growth likely won’t meet our standards as its backlog hasn’t budged over the past two years
2. Earnings per share fell by 2.1% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
3. Eroding returns on capital suggest its historical profit centers are aging

NVR’s stock price of $7,390 implies a valuation ratio of 17.8x forward P/E. To fully understand why you should be careful with NVR, check out our full research report (it’s free for active Edge members).

Stocks We Like More

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