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.
Just because a business has cash doesn’t mean it’s a good investment. Luckily, StockStory is here to help you separate the winners from the losers. Keeping that in mind, here are three companies with net cash positions that don’t make the cut and some better choices instead.
Amtech (ASYS)
Net Cash Position: $2.84 million (1.4% of Market Cap)
Focusing on the silicon carbide and power semiconductor sectors, Amtech Systems (NASDAQ: ASYS) produces the machinery and related chemicals needed for manufacturing semiconductors.
Why Do We Pass on ASYS?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 20.4% annually over the last two years
- Low free cash flow margin of 6.6% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Push for growth has led to negative returns on capital, signaling value destruction, and its falling returns suggest its earlier profit pools are drying up
Amtech is trading at $13.73 per share, or 2.8x trailing 12-month price-to-sales. Dive into our free research report to see why there are better opportunities than ASYS.
Rush Street Interactive (RSI)
Net Cash Position: $333.8 million (15.6% of Market Cap)
Specializing in online casino gaming and sports betting, Rush Street Interactive (NYSE: RSI) is an operator of digital gaming platforms.
Why Is RSI Risky?
- Demand for its offerings was relatively low as its number of monthly active users has underwhelmed
- Operating margin of 5.4% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 2.2 percentage points
Rush Street Interactive’s stock price of $21.08 implies a valuation ratio of 37x forward P/E. To fully understand why you should be careful with RSI, check out our full research report (it’s free).
First Financial Bankshares (FFIN)
Net Cash Position: $993.2 million (23% of Market Cap)
With roots dating back to 1890 and a network spanning over 70 locations across the Lone Star State, First Financial Bankshares (NASDAQ: FFIN) is a Texas-focused regional bank providing commercial banking, trust services, and wealth management across numerous communities throughout the state.
Why Do We Think Twice About FFIN?
- Sales trends were unexciting over the last five years as its 5.3% annual growth was below the typical banking company
- Net interest income trends were unexciting over the last five years as its 7.4% annual growth was below the typical banking firm
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 4.7% annually
At $30.34 per share, First Financial Bankshares trades at 2.1x forward P/B. If you’re considering FFIN for your portfolio, see our FREE research report to learn more.
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