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 are three companies with net cash positions that don’t make the cut and some better choices instead.
Photronics (PLAB)
Net Cash Position: $633.8 million (35% of Market Cap)
Sporting a global footprint of facilities, Photronics (NASDAQ: PLAB) is a manufacturer of photomasks, templates used to transfer patterns onto semiconductor wafers.
Why Do We Think Twice About PLAB?
- Sales tumbled by 1.4% annually over the last two years, showing market trends are working against it during this cycle
- Estimated sales growth of 1.8% for the next 12 months is soft and implies weaker demand
- Gross margin of 35% is below its competitors, leaving less money to invest in areas like marketing and R&D
At $32.89 per share, Photronics trades at 16.9x forward P/E. Check out our free in-depth research report to learn more about why PLAB doesn’t pass our bar.
Azenta (AZTA)
Net Cash Position: $324.8 million (31.4% of Market Cap)
Serving as the guardian of some of medicine's most valuable materials, Azenta (NASDAQ: AZTA) provides biological sample management, storage, and genomic services that help pharmaceutical and biotechnology companies preserve and analyze critical research materials.
Why Do We Avoid AZTA?
- Annual sales declines of 1.6% 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 24.8% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
Azenta’s stock price of $23.00 implies a valuation ratio of 38.8x forward P/E. Dive into our free research report to see why there are better opportunities than AZTA.
RPC (RES)
Net Cash Position: $150.7 million (9.8% of Market Cap)
Operating primarily in the Permian Basin with 10 hydraulic fracturing fleets, RPC (NYSE: RES) provides specialized services and equipment like hydraulic fracturing, coiled tubing, and cementing to help oil and gas companies complete and maintain wells.
Why Does RES Give Us Pause?
- Subscale operations are evident in its revenue base of $1.75 billion, meaning it has fewer distribution channels than its larger rivals
- Gross margin of 28.1% is below its competitors, leaving less money to invest in exploration and production
- Low free cash flow margin of 5.9% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
RPC is trading at $6.90 per share, or 0.8x forward price-to-sales. If you’re considering RES for your portfolio, see our FREE research report to learn more.
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