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.
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.
Marqeta (MQ)
Net Cash Position: $1.10 billion (55% of Market Cap)
Founded by CEO Jason Gardner in 2009, Marqeta (NASDAQ: MQ) is an innovative card issuer that provides companies with the ability to issue and process virtual, physical, and tokenized credit and debit cards.
Why Are We Wary of MQ?
- Sales stagnated over the last three years and signal the need for new growth strategies
- Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment
- Persistent operating losses suggest the business manages its expenses poorly
Marqeta’s stock price of $3.97 implies a valuation ratio of 3.4x forward price-to-sales. Read our free research report to see why you should think twice about including MQ in your portfolio.
Zeta (ZETA)
Net Cash Position: $169.9 million (5.4% of Market Cap)
Co-founded by former Apple CEO John Sculley, Zeta Global (NYSE: ZETA) provides software and data analytics tools that help companies market their products to billions of customers.
Why Does ZETA Give Us Pause?
- Competitive market dynamics make it difficult to retain customers, leading to a weak 97% net revenue retention rate
- Steep infrastructure costs and weaker unit economics for a software company are reflected in its low gross margin of 60.3%
- Historical operating losses show it had an inefficient cost structure while scaling
Zeta is trading at $13.21 per share, or 2.7x forward price-to-sales. If you’re considering ZETA for your portfolio, see our FREE research report to learn more.
Champion Homes (SKY)
Net Cash Position: $468.9 million (9.7% of Market Cap)
Founded in 1951, Champion Homes (NYSE: SKY) is a manufacturer of modular homes and buildings in North America.
Why Does SKY Fall Short?
- Flat unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Performance over the past two years was negatively impacted by new share issuances as its earnings per share dropped by 31.5% annually, worse than its revenue
- Diminishing returns on capital suggest its earlier profit pools are drying up
At $84.47 per share, Champion Homes trades at 22.6x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than SKY.
Stocks We Like More
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Growth Stocks for this month. 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.
