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.
Financial flexibility is valuable, but it’s not everything - at StockStory, we help you find the stocks that can not only survive but also outperform. Keeping that in mind, here are three companies with net cash positions to steer clear of and a few alternatives to consider.
eXp World (EXPI)
Net Cash Position: $184.9 million (11.1% of Market Cap)
Founded in 2009, eXp World (NASDAQ: EXPI) is a real estate company known for its virtual, cloud-based approach to real estate brokerage.
Why Do We Steer Clear of EXPI?
- Sluggish trends in its transactions suggest customers aren’t adopting its solutions as quickly as the company hoped
- Subpar operating margin of -0.5% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Earnings per share fell by 12.2% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
At $10.70 per share, eXp World trades at 23.4x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than EXPI.
Privia Health (PRVA)
Net Cash Position: $383.5 million (12.8% of Market Cap)
Operating in 13 states and the District of Columbia with over 4,300 providers serving more than 4.8 million patients, Privia Health (NASDAQ: PRVA) is a technology-driven company that helps physicians optimize their practices, improve patient experiences, and transition to value-based care models.
Why Do We Think Twice About PRVA?
- Smaller revenue base of $1.9 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Low free cash flow margin of 4.3% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Negative returns on capital show management lost money while trying to expand the business
Privia Health’s stock price of $24.46 implies a valuation ratio of 27.7x forward P/E. Check out our free in-depth research report to learn more about why PRVA doesn’t pass our bar.
DigitalBridge (DBRG)
Net Cash Position: $42.71 million (2% of Market Cap)
Transforming from a traditional real estate investor to a digital-focused powerhouse in 2021, DigitalBridge Group (NYSE: DBRG) is a global digital infrastructure investment firm that manages capital and operates assets across data centers, cell towers, fiber networks, and edge infrastructure.
Why Does DBRG Worry Us?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 21.7% annually over the last five years
- Below-average return on equity indicates management struggled to find compelling investment opportunities
DigitalBridge is trading at $11.90 per share, or 1.2x forward P/E. To fully understand why you should be careful with DBRG, check out our full research report (it’s free).
High-Quality Stocks for All Market Conditions
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