A surplus of cash can mean financial stability, but it can also indicate a reluctance (or inability) to invest in growth. Some of these companies also face challenges like stagnating revenue, declining market share, or limited scalability.
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 to steer clear of and a few alternatives to consider.
Sprinklr (CXM)
Net Cash Position: $455.8 million (33.9% of Market Cap)
With a proprietary AI engine processing 450 million data points daily across 30+ digital channels, Sprinklr (NYSE: CXM) provides cloud-based software that helps large enterprises manage customer experiences across social, messaging, chat, and voice channels.
Why Are We Out on CXM?
- Offerings struggled to generate meaningful interest as its average billings growth of 6% over the last year did not impress
- Estimated sales growth of 1.5% for the next 12 months implies demand will slow from its two-year trend
- Operating profits and efficiency rose over the last year as it benefited from some fixed cost leverage
Sprinklr’s stock price of $5.42 implies a valuation ratio of 1.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than CXM.
PlayStudios (MYPS)
Net Cash Position: $97.21 million (172% of Market Cap)
Founded by a team of former gaming industry executives, PlayStudios (NASDAQ: MYPS) offers free-to-play digital casino games.
Why Is MYPS Risky?
- Annual revenue declines of 2.7% over the last five years indicate problems with its market positioning
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 12.8% for the last two years
- Improving returns on capital suggest management is identifying more profitable investments
PlayStudios is trading at $0.44 per share, or 0.3x forward price-to-sales. To fully understand why you should be careful with MYPS, check out our full research report (it’s free).
Triumph Financial (TFIN)
Net Cash Position: $80.55 million (5.5% of Market Cap)
Originally focused on traditional banking before pivoting to serve the transportation sector, Triumph Financial (NYSE: TFIN) provides specialized financial services to the trucking industry, including payments processing, factoring, banking, and data intelligence solutions.
Why Do We Steer Clear of TFIN?
- Net interest income trends were unexciting over the last five years as its 5.3% annual growth was below the typical banking firm
- 131.8 basis point (100 basis points = 1 percentage point) decline in its net interest margin over the last two years reflects the firm’s willingness to accept lower profitability to defend its market position
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 19.1% annually while its revenue grew
At $62.05 per share, Triumph Financial trades at 1.6x forward P/B. Check out our free in-depth research report to learn more about why TFIN doesn’t pass our bar.
Stocks We Like More
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