1 Cash-Heavy Stock on Our Buy List and 2 We Brush Off

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 is one company with a net cash position that can leverage its balance sheet to grow and two best left off your watchlist.

Two Stocks to Sell:

Boise Cascade (BCC)

Net Cash Position: $36.05 million (1.1% of Market Cap)

Formed through the merger of two lumber companies, Boise Cascade Company (NYSE:BCC) manufactures and distributes wood products and other building materials.

Why Should You Dump BCC?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 6.7% annually over the last two years
2. Sales were less profitable over the last two years as its earnings per share fell by 30.1% annually, worse than its revenue declines
3. Waning returns on capital imply its previous profit engines are losing steam

At $84.89 per share, Boise Cascade trades at 10x forward P/E. To fully understand why you should be careful with BCC, check out our full research report (it’s free).

Fidelity National Financial (FNF)

Net Cash Position: $90 million (0.6% of Market Cap)

Issuing more title insurance policies than any other company in the United States, Fidelity National Financial (NYSE:FNF) provides title insurance and escrow services for real estate transactions while also offering annuities and life insurance through its F&G subsidiary.

Why Does FNF Give Us Pause?

1. Annual net premiums earned declines of 6.1% for the past four years show its policy sales struggled during this cycle
2. Day-to-day expenses have swelled relative to revenue over the last four years as its pre-tax profit margin fell by 9.9 percentage points
3. Performance over the past two years shows its incremental sales were less profitable, as its 1.2% annual earnings per share growth trailed its revenue gains

Fidelity National Financial’s stock price of $56.51 implies a valuation ratio of 1.6x forward P/B. Read our free research report to see why you should think twice about including FNF in your portfolio.

One Stock to Buy:

Energy Recovery (ERII)

Net Cash Position: $70.08 million (9.4% of Market Cap)

Having saved far more than a trillion gallons of water, Energy Recovery (NASDAQ:ERII) provides energy recovery devices to the water treatment, oil and gas, and chemical processing sectors.

Why Is ERII a Good Business?

1. Annual revenue growth of 15.1% over the last two years was superb and indicates its market share increased during this cycle
2. Superior product capabilities and pricing power lead to a best-in-class gross margin of 69.4%
3. Share repurchases over the last two years enabled its annual earnings per share growth of 71.9% to outpace its revenue gains

Energy Recovery is trading at $13.91 per share, or 16.7x 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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