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. That said, here are two companies with net cash positions that can continue growing sustainably and one with hidden risks.
One Stock to Sell:
Corcept (CORT)
Net Cash Position: $366 million (8.2% of Market Cap)
Focusing on the powerful stress hormone that affects everything from metabolism to immune function, Corcept Therapeutics (NASDAQ: CORT) develops and markets medications that modulate cortisol to treat endocrine disorders, cancer, and neurological diseases.
Why Are We Wary of CORT?
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 6.9% annually while its revenue grew
- 27.1 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Waning returns on capital imply its previous profit engines are losing steam
Corcept is trading at $42.00 per share, or 107.2x forward P/E. To fully understand why you should be careful with CORT, check out our full research report (it’s free).
Two Stocks to Buy:
Grid Dynamics (GDYN)
Net Cash Position: $325 million (67.7% of Market Cap)
With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ: GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.
Why Will GDYN Beat the Market?
- Annual revenue growth of 29.9% over the last five years was superb and indicates its market share increased during this cycle
- Earnings per share have massively outperformed its peers over the last five years, increasing by 21.7% annually
- Historical investments are beginning to pay off as its returns on capital are growing
Grid Dynamics’s stock price of $5.65 implies a valuation ratio of 12.8x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Accenture (ACN)
Net Cash Position: $1.06 billion (0.9% of Market Cap)
With a workforce of approximately 774,000 people serving clients in more than 120 countries, Accenture (NYSE: ACN) is a professional services firm that helps organizations transform their businesses through consulting, technology, operations, and digital services.
Why Will ACN Outperform?
- Impressive 9.6% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Unparalleled revenue scale of $72.11 billion gives it an edge in distribution
- Free cash flow margin jumped by 5.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $196.99 per share, Accenture trades at 13.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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