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.
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. That said, here are three companies with net cash positions to avoid and some better alternatives instead.
Udemy (UDMY)
Net Cash Position: $347.1 million (30.7% of Market Cap)
With courses ranging from investing to cooking to computer programming, Udemy (NASDAQ: UDMY) is an online learning platform that connects learners with expert instructors who specialize in a wide range of topics.
Why Does UDMY Give Us Pause?
- Decision to emphasize platform growth over monetization has contributed to 1.6% annual declines in its average revenue per buyer
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Excessive marketing spend signals little organic demand and traction for its platform
Udemy’s stock price of $7.49 implies a valuation ratio of 12.2x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than UDMY.
Clarus (CLAR)
Net Cash Position: $39.4 million (30.4% of Market Cap)
Initially a financial services business, Clarus (NASDAQ: CLAR) designs, manufactures, and distributes outdoor equipment and lifestyle products.
Why Is CLAR Risky?
- Products and services have few die-hard fans as sales have declined by 17.4% annually over the last two years
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 16.5% annually
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $3.30 per share, Clarus trades at 8.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why CLAR doesn’t pass our bar.
EPAM (EPAM)
Net Cash Position: $1.02 billion (10.1% of Market Cap)
Founded in 1993 during the early days of offshore software development, EPAM Systems (NYSE: EPAM) provides digital engineering, cloud, and AI transformation services to help global enterprises and startups modernize their technology systems and create digital products.
Why Are We Hesitant About EPAM?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Free cash flow margin shrank by 7.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Eroding returns on capital suggest its historical profit centers are aging
EPAM is trading at $178.56 per share, or 16.4x forward P/E. To fully understand why you should be careful with EPAM, check out our full research report (it’s free).
Stocks We Like More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free.
