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.
Not all businesses with cash are winners, and that’s why we built StockStory - to help you separate the good from the bad. That said, here are three companies with net cash positions to avoid and some better alternatives instead.
Perdoceo Education (PRDO)
Net Cash Position: $514.3 million (26.6% of Market Cap)
Formerly known as Career Education Corporation, Perdoceo Education (NASDAQ: PRDO) is an educational services company that specializes in postsecondary education.
Why Are We Wary of PRDO?
- Sales trends were unexciting over the last two years as its 1.3% annual growth was below the typical consumer discretionary company
- Diminishing returns on capital suggest its earlier profit pools are drying up
Perdoceo Education is trading at $29.39 per share, or 12.2x forward EV-to-EBITDA. If you’re considering PRDO for your portfolio, see our FREE research report to learn more.
LeMaitre (LMAT)
Net Cash Position: $117.2 million (6% of Market Cap)
Founded in 1983 and named after a pioneering vascular surgeon, LeMaitre Vascular (NASDAQGM:LMAT) develops and manufactures specialized medical devices used by vascular surgeons to treat peripheral vascular disease and other circulatory conditions.
Why Does LMAT Worry Us?
- Smaller revenue base of $226.3 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- 8.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $85.75 per share, LeMaitre trades at 37x forward P/E. Read our free research report to see why you should think twice about including LMAT in your portfolio.
Regions Financial (RF)
Net Cash Position: $6.34 billion (28.4% of Market Cap)
Tracing its roots back to 1971 and operating in a region known as the "heart of Dixie," Regions Financial (NYSE: RF) is a financial holding company that provides banking services, wealth management, and specialty financial solutions across the South, Midwest, and Texas.
Why Are We Hesitant About RF?
- Net interest income trends were unexciting over the last four years as its 5.3% annual growth was below the typical bank company
- Estimated net interest income growth of 3.4% for the next 12 months implies demand will slow from its four-year trend
- Tangible book value per share stagnated over the last five years and signals the need for new capital management strategies
Regions Financial’s stock price of $24.84 implies a valuation ratio of 1.3x forward P/B. To fully understand why you should be careful with RF, 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 6 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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