3 Cash-Heavy Stocks We Think Twice About

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 to steer clear of and a few alternatives to consider.

Chewy (CHWY)

Net Cash Position: $142.6 million (1% of Market Cap)

Founded by Ryan Cohen, who later became known for his involvement in GameStop, Chewy (NYSE:CHWY) is an online retailer specializing in pet food, supplies, and healthcare services.

Why Does CHWY Worry Us?

1. Sizable revenue base leads to growth challenges as its 8.5% annual revenue increases over the last three years fell short of other consumer internet companies
2. Estimated sales growth of 6.1% for the next 12 months implies demand will slow from its three-year trend
3. Gross margin of 29.4% is below its competitors, leaving less money to invest in areas like marketing and R&D

Chewy’s stock price of $33.39 implies a valuation ratio of 17x forward EV/EBITDA. Read our free research report to see why you should think twice about including CHWY in your portfolio.

Revolve (RVLV)

Net Cash Position: $280.1 million (12.5% of Market Cap)

Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve (NASDAQ:RVLV) is a fashion retailer leveraging social media and a community of fashion influencers to drive its merchandising strategy.

Why Are We Out on RVLV?

1. May need to improve its platform and marketing strategy as its 5.7% average growth in active customers underwhelmed
2. Lackluster growth in its average revenue per buyer coupled with its weaker engagement trends led to sluggish demand over the last two years
3. Earnings per share have dipped by 10.5% annually over the past three years, which is concerning because stock prices follow EPS over the long term

Revolve is trading at $31.35 per share, or 21.3x forward EV/EBITDA. To fully understand why you should be careful with RVLV, check out our full research report (it’s free).

Sonos (SONO)

Net Cash Position: $174.2 million (8.5% of Market Cap)

A pioneer in connected home audio systems, Sonos (NASDAQ:SONO) offers a range of premium wireless speakers and sound systems.

Why Should You Dump SONO?

1. Annual revenue growth of 1.7% over the last five years was below our standards for the consumer discretionary sector
2. Low free cash flow margin of 8.2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

At $16.89 per share, Sonos trades at 18.7x forward P/E. If you’re considering SONO for your portfolio, see our FREE research report to learn more.

Stocks We Like More

Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.