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.
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 continue growing sustainably and two with hidden risks.
Two Stocks to Sell:
Coupang (CPNG)
Net Cash Position: $905 million (2.9% of Market Cap)
Founded in 2010 by Harvard Business School student Bom Kim, Coupang (NYSE: CPNG) is an e-commerce giant often referred to as the "Amazon of South Korea".
Why Is CPNG Not Exciting?
- Gross margin of 29% reflects its high servicing costs
- Performance over the past three years shows its incremental sales were much less profitable, as its earnings per share fell by 40% annually
- Low free cash flow margin of 2% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $17.09 per share, Coupang trades at 2.7x forward price-to-gross profit. Dive into our free research report to see why there are better opportunities than CPNG.
Dime Community Bancshares (DCOM)
Net Cash Position: $938 million (53.4% of Market Cap)
With roots dating back to 1910 and a name that evokes the historic "dime savings banks" of America's past, Dime Community Bancshares (NASDAQ: DCOM) is a New York-based bank holding company that provides commercial banking and financial services to businesses and consumers throughout Greater Long Island.
Why Does DCOM Worry Us?
- Net interest margin of 2.9% is well below other banks, signaling its loans aren’t very profitable
- Earnings per share fell by 1.1% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- 5.9% annual tangible book value per share growth over the last two years was slower than its banking peers
Dime Community Bancshares’s stock price of $39.25 implies a valuation ratio of 1.2x forward P/B. Read our free research report to see why you should think twice about including DCOM in your portfolio.
One Stock to Buy:
Oscar Health (OSCR)
Net Cash Position: $4.37 billion (50.2% of Market Cap)
Founded in 2012 to simplify the notoriously complex American healthcare system, Oscar Health (NYSE: OSCR) is a technology-focused health insurance company that offers individual and small group health plans through its cloud-native platform.
Why Are We Bullish on OSCR?
- Annual revenue growth of 42.6% over the past two years was outstanding, reflecting market share gains this cycle
- Earnings growth has massively outpaced its peers over the last four years as its EPS has compounded at 31.5% annually
- Free cash flow margin grew by 19.9 percentage points over the last five years, giving the company more chips to play with
Oscar Health is trading at $29.15 per share, or 25.7x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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