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 is one company with a net cash position that can leverage its balance sheet to grow and two with hidden risks.
Two Stocks to Sell:
Richardson Electronics (RELL)
Net Cash Position: $34.64 million (24.6% of Market Cap)
Founded in 1947, Richardson Electronics (NASDAQ: RELL) is a distributor of power grid and microwave tubes as well as consumables related to those products.
Why Are We Out on RELL?
- Annual sales declines of 12.3% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share have contracted by 74.7% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.4% for the last five years
Richardson Electronics’s stock price of $9.78 implies a valuation ratio of 14x forward P/E. If you’re considering RELL for your portfolio, see our FREE research report to learn more.
Byrna (BYRN)
Net Cash Position: $10.4 million (2% of Market Cap)
Providing civilians with tools to disable, disarm, and deter would-be assailants, Byrna (NASDAQ: BYRN) is a provider of non-lethal weapons.
Why Does BYRN Give Us Pause?
- Suboptimal cost structure is highlighted by its history of operating margin losses
- Cash-burning history makes us doubt the long-term viability of its business model
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $23.17 per share, Byrna trades at 52.3x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than BYRN.
One Stock to Buy:
HCI Group (HCI)
Net Cash Position: $572.6 million (35.7% of Market Cap)
Starting as a Florida "take-out" insurer that assumed policies from the state-backed Citizens Property Insurance Corporation, HCI Group (NYSE: HCI) provides property and casualty insurance, primarily homeowners coverage, while leveraging proprietary technology to improve underwriting and claims processing.
Why Should You Buy HCI?
- Annual net premiums earned growth of 24.2% over the past two years was outstanding, reflecting market share gains this cycle
- Impressive 52.2% annual book value per share growth over the last two years indicates it’s building equity value this cycle
- Notable projected book value per share growth of 22.2% for the next 12 months hints at strong capital generation
HCI Group is trading at $138.99 per share, or 2.4x forward P/B. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
