3 Cash-Heavy Stocks with Open Questions

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.

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 are three companies with net cash positions to avoid and some better alternatives instead.

Manhattan Associates (MANH)

Net Cash Position: $272.6 million (3.2% of Market Cap)

Built on a "versionless" cloud architecture that delivers quarterly updates to all customers, Manhattan Associates (NASDAQ:MANH) develops cloud-based software that helps retailers, wholesalers, and manufacturers manage their supply chains, inventory, and omnichannel operations.

Why Does MANH Give Us Pause?

1. Products, pricing, or go-to-market strategy may need some adjustments as its 4.1% average billings growth over the last year was weak
2. Sky-high servicing costs result in an inferior gross margin of 56.3% that must be offset through increased usage
3. Operating margin was unchanged over the last year, suggesting it failed to gain leverage on its fixed costs

At $145.10 per share, Manhattan Associates trades at 7.9x forward price-to-sales. If you’re considering MANH for your portfolio, see our FREE research report to learn more.

Scorpio Tankers (STNG)

Net Cash Position: $132.8 million (3.5% of Market Cap)

Operating one of the youngest fleets in the industry, Scorpio Tankers (NYSE: STNG) is an international provider of marine transportation services, specializing in the shipment of refined petroleum.

Why Does STNG Worry Us?

1. Sluggish trends in its total vessels suggest customers aren’t adopting its solutions as quickly as the company hoped
2. Projected sales decline of 1.5% over the next 12 months indicates demand will continue deteriorating
3. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

Scorpio Tankers is trading at $80.89 per share, or 13.5x forward P/E. Dive into our free research report to see why there are better opportunities than STNG.

Mercury General (MCY)

Net Cash Position: $1.06 billion (20.7% of Market Cap)

Founded in 1961 and maintaining a network of over 6,300 independent agents across the country, Mercury General (NYSE:MCY) is an insurance company that primarily sells automobile insurance policies through independent agents in 11 states, with a strong focus on California.

Why Are We Hesitant About MCY?

1. Estimated sales growth of 1.3% for the next 12 months implies demand will slow from its two-year trend
2. Muted 3.5% annual book value per share growth over the last five years shows its capital generation lagged behind its insurance peers
3. Below-average return on equity indicates management struggled to find compelling investment opportunities

Mercury General’s stock price of $93.06 implies a valuation ratio of 1.8x forward P/B. Check out our free in-depth research report to learn more about why MCY doesn’t pass our bar.

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