1 Cash-Heavy Stock to Keep an Eye On and 2 We Avoid

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.

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 is one company with a net cash position that can leverage its balance sheet to grow and two that may struggle.

Two Stocks to Sell:

Salesforce (CRM)

Net Cash Position: $4.14 billion (1.8% of Market Cap)

With its cloud-based platform named after its stock ticker symbol CRM (Customer Relationship Management), Salesforce (NYSE:CRM) provides customer relationship management software that helps businesses connect with their customers across sales, service, marketing, and commerce.

Why Are We Cautious About CRM?

1. Average ARR growth of 9% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 8.9%
3. Operating margin improvement of 2.1 percentage points over the last year demonstrates its ability to scale efficiently

At $244.99 per share, Salesforce trades at 5.5x forward price-to-sales. To fully understand why you should be careful with CRM, check out our full research report (it’s free).

YETI (YETI)

Net Cash Position: $92.69 million (3.3% of Market Cap)

Founded by two brothers from Texas, YETI (NYSE:YETI) specializes in durable outdoor goods including coolers, drinkware, and other gear tailored to adventure enthusiasts.

Why Does YETI Fall Short?

1. Muted 6.3% annual revenue growth over the last two years shows its demand lagged behind its consumer discretionary peers
2. Free cash flow margin is forecasted to shrink by 6.7 percentage points in the coming year, suggesting the company will consume more capital to keep up with its competitors
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

YETI is trading at $34.07 per share, or 15.8x forward P/E. Check out our free in-depth research report to learn more about why YETI doesn’t pass our bar.

One Stock to Watch:

WSFS Financial (WSFS)

Net Cash Position: $1.02 billion (33.6% of Market Cap)

Founded in 1832 as Wilmington Savings Fund Society and one of the oldest banks in America still operating under its original name, WSFS Financial (NASDAQ:WSFS) operates a community banking and wealth management franchise primarily serving customers in the Mid-Atlantic region through its main subsidiary, WSFS Bank.

Why Do We Like WSFS?

1. Annual revenue growth of 9.2% over the last five years was superb and indicates its market share increased during this cycle
2. Incremental sales significantly boosted profitability as its annual earnings per share growth of 21.8% over the last five years outstripped its revenue performance
3. Balance sheet strength has increased this cycle as its 18.6% annual tangible book value per share growth over the last two years was exceptional

WSFS Financial’s stock price of $54.28 implies a valuation ratio of 1.1x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

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