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. Keeping that in mind, here are three companies with net cash positions to avoid and some better alternatives instead.
Procore Technologies (PCOR)
Net Cash Position: $696.1 million (7.9% of Market Cap)
With a mission to build software for the people that build the world, Procore Technologies (NYSE: PCOR) provides cloud-based software that enables owners, contractors, and other stakeholders to collaborate and manage construction projects from any device.
Why Is PCOR Not Exciting?
- Customers were hesitant to make long-term commitments to its software as its 14.8% average ARR growth over the last year was sluggish
- Estimated sales growth of 12.9% for the next 12 months implies demand will slow from its two-year trend
- Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
Procore Technologies is trading at $58.75 per share, or 6x forward price-to-sales. If you’re considering PCOR for your portfolio, see our FREE research report to learn more.
Veralto (VLTO)
Net Cash Position: $10 million (0% of Market Cap)
Spun off from Danaher in 2023, Veralto (NYSE: VLTO) provides water analytics and treatment solutions.
Why Are We Wary of VLTO?
- Annual revenue growth of 4.1% over the last four years was below our standards for the industrials sector
- Anticipated sales growth of 6.3% for the next year implies demand will be shaky
Veralto’s stock price of $91.86 implies a valuation ratio of 21.7x forward P/E. To fully understand why you should be careful with VLTO, check out our full research report (it’s free).
Novanta (NOVT)
Net Cash Position: $157.6 million (3.7% of Market Cap)
Originally a pioneer in the laser scanning industry during the late 1960s, Novanta (NASDAQ: NOVT) offers medicine and manufacturing technology to the medical, life sciences, and manufacturing industries.
Why Does NOVT Worry Us?
- Muted 5.5% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Incremental sales over the last two years were less profitable as its 4.2% annual earnings per share growth lagged its revenue gains
- Free cash flow margin shrank by 5.6 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $119.38 per share, Novanta trades at 34x forward P/E. Dive into our free research report to see why there are better opportunities than NOVT.
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