Companies with more cash than debt can be financially resilient, but that doesn’t mean they’re all strong investments. Some lack leverage because they struggle to grow or generate consistent profits, making them unattractive borrowers.
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. That said, here is one company with a net cash position that can leverage its balance sheet to grow and two best left off your watchlist.
Two Stocks to Sell:
DocuSign (DOCU)
Net Cash Position: $681.4 million (7.6% of Market Cap)
Creating the digital equivalent of "sign on the dotted line" for over a billion users worldwide, DocuSign (NASDAQ: DOCU) provides an agreement management platform that enables businesses to electronically prepare, sign, and manage documents and contracts.
Why Does DOCU Give Us Pause?
- ARR growth averaged a weak 8.7% over the last year, suggesting that competition is pulling some attention away from its software
- Anticipated sales growth of 8.4% for the next year implies demand will be shaky
- Operating margin improvement of 2.6 percentage points over the last year demonstrates its ability to scale efficiently
DocuSign is trading at $46.59 per share, or 2.7x forward price-to-sales. If you’re considering DOCU for your portfolio, see our FREE research report to learn more.
Preferred Bank (PFBC)
Net Cash Position: $443.3 million (40.9% of Market Cap)
Founded in 1991 with a focus on serving the Pacific Rim community in Southern California, Preferred Bank (NASDAQ: PFBC) is a commercial bank that provides banking products and services to small and mid-sized businesses, entrepreneurs, real estate developers, and high net worth individuals.
Why Are We Hesitant About PFBC?
- Muted 9.2% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- 76.5 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
- Earnings per share have dipped by 1.8% annually over the past two years, which is concerning because stock prices follow EPS over the long term
At $89.41 per share, Preferred Bank trades at 1.2x forward P/B. To fully understand why you should be careful with PFBC, check out our full research report (it’s free).
One Stock to Watch:
Applied Materials (AMAT)
Net Cash Position: $1.96 billion (0.7% of Market Cap)
Founded in 1967 as the first company to develop tools for other businesses in the semiconductor industry, Applied Materials (NASDAQ: AMAT) is the largest provider of semiconductor wafer fabrication equipment.
Why Are We Fans of AMAT?
- Disciplined cost controls and effective management resulted in a strong two-year operating margin of 28.7%
- AMAT is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
- Industry-leading 46.8% return on capital demonstrates management’s skill in finding high-return investments
Applied Materials’s stock price of $368.65 implies a valuation ratio of 31x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
