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.
Financial flexibility is valuable, but it’s not everything - at StockStory, we help you find the stocks that can not only survive but also outperform. 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:
Revolve (RVLV)
Net Cash Position: $280.7 million (18.8% of Market Cap)
Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve (NYSE:RVLV) is a fashion retailer leveraging social media and a community of fashion influencers to drive its merchandising strategy.
Why Are We Cautious About RVLV?
- Sales trends were unexciting over the last three years as its 6.6% annual growth was below the typical consumer internet company
- May need to improve its platform and marketing strategy as its 6.5% average growth in active customers underwhelmed
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
Revolve is trading at $21.16 per share, or 11.5x forward EV/EBITDA. To fully understand why you should be careful with RVLV, check out our full research report (it’s free).
Cal-Maine (CALM)
Net Cash Position: $678.9 million (22.4% of Market Cap)
Known for brands such as Egg-Land’s Best and Land O’ Lakes, Cal-Maine (NASDAQ:CALM) produces, packages, and distributes eggs.
Why Does CALM Fall Short?
- Sales tumbled by 5% annually over the last three years, showing consumer trends are working against it
- Performance over the past three years shows each sale was less profitable as its earnings per share dropped by 54.9% annually, worse than its revenue
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 28.9 percentage points
Cal-Maine’s stock price of $64.50 implies a valuation ratio of 1.3x forward price-to-sales. Read our free research report to see why you should think twice about including CALM in your portfolio.
One Stock to Watch:
Western Digital (WDC)
Net Cash Position: $527 million (0.3% of Market Cap)
Founded in 1970 by a Motorola employee, Western Digital (NASDAQ: WDC) is a leading producer of hard disk drives, SSDs and flash memory.
Why Could WDC Be a Winner?
- Estimated revenue growth of 48.5% for the next 12 months implies demand will accelerate from its two-year trend
- Operating margin expansion of 21.7 percentage points over the last five years shows the company optimized its expenses
- Free cash flow margin grew by 23.1 percentage points over the last five years, giving the company more chips to play with
At $441.76 per share, Western Digital trades at 20.5x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.