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.

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 three companies with net cash positions to avoid and some better alternatives instead.

WSFS Financial (WSFS)

Net Cash Position: $1.17 billion (38.1% of Market Cap)

Founded in 1832 as Wilmington Savings Fund Society and one of the oldest banks in America still operating under its original name, WSFS Financial (NASDAQ: WSFS) operates a community banking and wealth management franchise primarily serving customers in the Mid-Atlantic region through its main subsidiary, WSFS Bank.

Why Does WSFS Give Us Pause?

1. Annual net interest income growth of 9.3% over the last five years was below our standards for the banking sector
2. Projected net interest income is flat for the next 12 months, implying demand will slow from its five-year trend
3. Annual earnings per share growth of 1.2% underperformed its revenue over the last two years, showing its incremental sales were less profitable

At $56.15 per share, WSFS Financial trades at 1.1x forward P/B. Check out our free in-depth research report to learn more about why WSFS doesn’t pass our bar.

OFG Bancorp (OFG)

Net Cash Position: $125.9 million (7.1% of Market Cap)

Originally founded in 1964 as a federal savings and loan institution, OFG Bancorp (NYSE: OFG) provides banking and financial services including commercial and consumer lending, wealth management, insurance, and trust services primarily in Puerto Rico and the U.S. Virgin Islands.

Why Are We Hesitant About OFG?

1. Net interest income trends were unexciting over the last five years as its 9.2% annual growth was below the typical banking firm
2. Estimated net interest income growth of 1.4% for the next 12 months implies demand will slow from its five-year trend
3. Net interest margin dropped by 69.7 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market

OFG Bancorp’s stock price of $40.17 implies a valuation ratio of 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than OFG.

Dime Community Bancshares (DCOM)

Net Cash Position: $453.2 million (35.8% of Market Cap)

With roots dating back to 1910 and a name that evokes the historic "dime savings banks" of America's past, Dime Community Bancshares (NASDAQ: DCOM) is a New York-based bank holding company that provides commercial banking and financial services to businesses and consumers throughout Greater Long Island.

Why Are We Cautious About DCOM?

1. Muted 1.4% annual revenue growth over the last two years shows its demand lagged behind its banking peers
2. Inferior net interest margin of 2.7% means it must compensate for lower profitability through increased loan originations
3. Incremental sales over the last five years were less profitable as its 1.6% annual earnings per share growth lagged its revenue gains

Dime Community Bancshares is trading at $28.86 per share, or 0.9x forward P/B. To fully understand why you should be careful with DCOM, check out our full research report (it’s free for active Edge members).

Stocks We Like More

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