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 is one company with a net cash position that balances growth with stability and two best left off your watchlist.
Two Stocks to Sell:
UiPath (PATH)
Net Cash Position: $1.40 billion (25.1% of Market Cap)
Starting with robotic process automation (RPA) and evolving into a comprehensive automation powerhouse, UiPath (NYSE: PATH) provides an AI-powered business automation platform that enables organizations to create software robots that mimic human actions to streamline repetitive tasks and processes.
Why Are We Hesitant About PATH?
- Annual revenue growth of 11% over the last two years was below our standards for the software sector
- Products, pricing, or go-to-market strategy may need some adjustments as its 7.4% average billings growth over the last year was weak
- Estimated sales growth of 9.1% for the next 12 months implies demand will slow from its two-year trend
At $10.64 per share, UiPath trades at 3.3x forward price-to-sales. Check out our free in-depth research report to learn more about why PATH doesn’t pass our bar.
Zillow (ZG)
Net Cash Position: $354 million (3.8% of Market Cap)
Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ: ZG) is the leading U.S. online real estate marketplace.
Why Do We Think ZG Will Underperform?
- Annual sales declines of 4.7% for the past five years show its products and services struggled to connect with the market
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 10.6% annually
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
Zillow is trading at $40.76 per share, or 16.9x forward P/E. If you’re considering ZG for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Plexus (PLXS)
Net Cash Position: $68.99 million (0.9% of Market Cap)
With over 20,000 team members across 26 global facilities, Plexus (NASDAQ: PLXS) designs, manufactures, and services complex electronic products for companies in aerospace/defense, healthcare, and industrial sectors.
Why Is PLXS on Our Radar?
- Market share is on track to rise over the next 12 months as its 18.2% projected revenue growth implies demand will accelerate from its two-year trend
- Share repurchases over the last two years enabled its annual earnings per share growth of 28.9% to outpace its revenue gains
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
Plexus’s stock price of $271.79 implies a valuation ratio of 29.9x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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