Companies with more cash than debt can be financially resilient, but that doesn’t mean they’re all strong investments. Some lack leverage because they struggle to grow or generate consistent profits, making them unattractive borrowers.
Not all businesses with cash are winners, and that’s why we built StockStory - to help you separate the good from the bad. That said, here are three companies with net cash positions that don’t make the cut and some better choices instead.
Commvault (CVLT)
Net Cash Position: $333.6 million (3.9% of Market Cap)
Born from the need to create ironclad protection in an increasingly dangerous digital world, Commvault (NASDAQ: CVLT) provides data protection and cyber resilience software that helps organizations secure, back up, and recover their data across on-premises, hybrid, and multi-cloud environments.
Why Are We Hesitant About CVLT?
- 9.1% annual revenue growth over the last five years was slower than its software peers
- Estimated sales growth of 13.2% for the next 12 months implies demand will slow from its two-year trend
- Costs have risen faster than its revenue over the last year, causing its operating margin to decline by 1.1 percentage points
Commvault is trading at $193.72 per share, or 7.4x forward price-to-sales. If you’re considering CVLT for your portfolio, see our FREE research report to learn more.
Proto Labs (PRLB)
Net Cash Position: $100.8 million (8.3% of Market Cap)
Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE: PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.
Why Do We Think PRLB Will Underperform?
- Sales trends were unexciting over the last two years as its 2.4% annual growth was below the typical industrials company
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.6 percentage points
- Earnings per share have dipped by 9.3% annually over the past five years, which is concerning because stock prices follow EPS over the long term
At $51.02 per share, Proto Labs trades at 34.5x forward P/E. Check out our free in-depth research report to learn more about why PRLB doesn’t pass our bar.
NBT Bancorp (NBTB)
Net Cash Position: $17.22 million (0.8% of Market Cap)
Tracing its roots back to 1856 when it first opened its doors in Norwich, New York, NBT Bancorp (NASDAQ: NBTB) is a community-oriented financial institution providing banking, wealth management, and insurance services to individuals and businesses across the northeastern United States.
Why Are We Wary of NBTB?
- Inferior net interest margin of 3.3% means it must compensate for lower profitability through increased loan originations
- Annual earnings per share growth of 3.1% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Estimated tangible book value per share growth of 3.7% for the next 12 months implies profitability will slow from its two-year trend
NBT Bancorp’s stock price of $42.83 implies a valuation ratio of 1.2x forward P/B. Read our free research report to see why you should think twice about including NBTB in your portfolio.
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