3 Cash-Heavy Stocks Skating on Thin Ice

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

Movado (MOV)

Net Cash Position: $114.2 million (37.3% of Market Cap)

With its watches displayed in 20 museums around the world, Movado (NYSE:MOV) is a watchmaking company with a portfolio of watch brands and accessories.

Why Should You Dump MOV?

1. Sales tumbled by 1.4% annually over the last five years, showing consumer trends are working against its favor
2. Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 13.8% annually, worse than its revenue
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

At $13.60 per share, Movado trades at 0.5x forward price-to-sales. To fully understand why you should be careful with MOV, check out our full research report (it’s free).

Sonos (SONO)

Net Cash Position: $263.7 million (25.4% of Market Cap)

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

Why Are We Out on SONO?

1. Products and services aren't resonating with the market as its revenue declined by 9.1% annually over the last two years
2. Historical operating losses point to an inefficient cost structure
3. Earnings per share fell by 5.8% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable

Sonos’s stock price of $8.68 implies a valuation ratio of 14.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why SONO doesn’t pass our bar.

Incyte (INCY)

Net Cash Position: $2.12 billion (18.9% of Market Cap)

Founded in 1991 and evolving from a genomics research firm to a commercial-stage drug developer, Incyte (NASDAQ:INCY) is a biopharmaceutical company that discovers, develops, and commercializes proprietary therapeutics for cancer and inflammatory diseases.

Why Do We Think Twice About INCY?

1. Day-to-day expenses have swelled relative to revenue over the last two years as its adjusted operating margin fell by 13.9 percentage points
2. Earnings per share have dipped by 14.8% annually over the past five years, which is concerning because stock prices follow EPS over the long term
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Incyte is trading at $58.17 per share, or 9.9x forward price-to-earnings. If you’re considering INCY for your portfolio, see our FREE research report to learn more.

Stocks We Like More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.