3 Cash-Heavy Stocks We Keep Off Our Radar

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. That said, here are three companies with net cash positions that don’t make the cut and some better choices instead.

Skillz (SKLZ)

Net Cash Position: $127.7 million (120% of Market Cap)

Taking a new twist at video gaming, Skillz (NYSE:SKLZ) offers developers a platform to create and distribute mobile games where players can pay fees to compete for cash prizes.

Why Is SKLZ Risky?

1. Paying Monthly Active Users have declined by 33.6% annually over the last two years, suggesting it may need to revamp its features or user experience to stay competitive
2. Persistent EBITDA margin losses suggest the business manages its expenses poorly
3. Negative free cash flow raises questions about the return timeline for its investments

Skillz’s stock price of $7 implies a valuation ratio of 1.3x forward price-to-gross profit. If you’re considering SKLZ for your portfolio, see our FREE research report to learn more.

Dillard's (DDS)

Net Cash Position: $605 million (8.3% of Market Cap)

With stores located largely in the Southern and Western US, Dillard’s (NYSE:DDS) is a department store chain that sells clothing, cosmetics, accessories, and home goods.

Why Are We Wary of DDS?

1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
2. Projected sales decline of 2.1% for the next 12 months points to an even tougher demand environment ahead
3. Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 2.1 percentage points

Dillard's is trading at $468.55 per share, or 11.2x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including DDS in your portfolio.

UFP Industries (UFPI)

Net Cash Position: $607.6 million (10.5% of Market Cap)

Beginning as a lumber supplier in the 1950s, UFP Industries (NASDAQ:UFPI) is a holding company making building materials for the construction, retail, and industrial sectors.

Why Are We Cautious About UFPI?

1. Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
3. Eroding returns on capital suggest its historical profit centers are aging

At $97.73 per share, UFP Industries trades at 15.1x forward P/E. Dive into our free research report to see why there are better opportunities than UFPI.

Stocks We Like More

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