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.
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 leverage its balance sheet to grow and two that may struggle.
Two Stocks to Sell:
Snap-on (SNA)
Net Cash Position: $161 million (1% of Market Cap)
Founded in 1920, Snap-on (NYSE: SNA) is a global provider of tools, equipment, and diagnostics for various industries such as vehicle repair, aerospace, and the military.
Why Are We Hesitant About SNA?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 6.3 percentage points
- Diminishing returns on capital suggest its earlier profit pools are drying up
Snap-on’s stock price of $315.01 implies a valuation ratio of 15.8x forward P/E. To fully understand why you should be careful with SNA, check out our full research report (it’s free).
Regeneron (REGN)
Net Cash Position: $5.64 billion (9.9% of Market Cap)
Founded by scientists who wanted to build a company where science could thrive, Regeneron Pharmaceuticals (NASDAQ: REGN) develops and commercializes medicines for serious diseases, with key products treating eye conditions, allergic diseases, cancer, and other disorders.
Why Does REGN Fall Short?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 6.7% for the last two years
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 12.3 percentage points
- Eroding returns on capital suggest its historical profit centers are aging
Regeneron is trading at $536.51 per share, or 13.4x forward P/E. Dive into our free research report to see why there are better opportunities than REGN.
One Stock to Buy:
Vital Farms (VITL)
Net Cash Position: $137.1 million (8% of Market Cap)
With an emphasis on ethically produced products, Vital Farms (NASDAQ: VITL) specializes in pasture-raised eggs and butter.
Why Are We Bullish on VITL?
- Stellar 17.8% growth in unit sales over the past two years demonstrates the high demand for its products
- Market share will likely rise over the next 12 months as its expected revenue growth of 26.7% is robust
- Earnings per share grew by 161% annually over the last three years, massively outpacing its peers
At $38.20 per share, Vital Farms trades at 27.9x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even 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 9 Market-Beating Stocks. 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
