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.
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 are three companies with net cash positions to steer clear of and a few alternatives to consider.
Qualys (QLYS)
Net Cash Position: $392.2 million (7.6% of Market Cap)
Founded in 1999 as one of the first subscription security companies, Qualys (NASDAQ:QLYS) provides organizations with software to assess their exposure to cyber-attacks.
Why Does QLYS Worry Us?
- Offerings struggled to generate meaningful interest as its average billings growth of 5.2% over the last year did not impress
- Estimated sales growth of 6.6% for the next 12 months implies demand will slow from its three-year trend
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 6.9 percentage points over the next year
Qualys is trading at $141.86 per share, or 7.9x forward price-to-sales. Check out our free in-depth research report to learn more about why QLYS doesn’t pass our bar.
First Solar (FSLR)
Net Cash Position: $365.6 million (2% of Market Cap)
Headquartered in Arizona, First Solar (NASDAQ:FSLR) specializes in manufacturing solar panels and providing photovoltaic solar energy solutions.
Why Is FSLR Not Exciting?
- Sales trends were unexciting over the last five years as its 6.8% annual growth was below the typical industrials company
- Investments to defend its competitive moat have ramped up over the last five years as its free cash flow margin decreased by 18.5 percentage points
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
First Solar’s stock price of $166.35 implies a valuation ratio of 8.2x forward P/E. To fully understand why you should be careful with FSLR, check out our full research report (it’s free).
Cognex (CGNX)
Net Cash Position: $126.7 million (2.5% of Market Cap)
Founded in 1981 when computer vision was in its infancy, Cognex (NASDAQ:CGNX) develops machine vision systems and software that help manufacturers and logistics companies automate quality inspection and tracking of products.
Why Do We Think CGNX Will Underperform?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 12.2 percentage points
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $30.06 per share, Cognex trades at 33.5x forward P/E. If you’re considering CGNX for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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 5 Growth Stocks for this month. 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.