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.
Not all businesses with cash are winners, and that’s why we built StockStory - to help you separate the good from the bad. Keeping that in mind, here are two companies with net cash positions that can continue growing sustainably and one that may struggle.
One Stock to Sell:
Guidewire (GWRE)
Net Cash Position: $283.2 million (1.7% of Market Cap)
Founded by two individuals involved in the development of leading procurement software Ariba, Guidewire (NYSE:GWRE) offers insurance companies a software-as-a-service platform to help sell their products and manage their workflows.
Why Are We Wary of GWRE?
- Annual revenue growth of 12.4% over the last three years was below our standards for the software sector
- Gross margin of 61.4% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Customer acquisition costs take a while to recoup, making it difficult to justify sales and marketing investments that could increase revenue
Guidewire is trading at $197.01 per share, or 13.2x forward price-to-sales. To fully understand why you should be careful with GWRE, check out our full research report (it’s free).
Two Stocks to Watch:
Toast (TOST)
Net Cash Position: $1.36 billion (6.5% of Market Cap)
Founded by three MIT engineers at a local Cambridge bar, Toast (NYSE:TOST) provides integrated point-of-sale (POS) hardware, software, and payments solutions for restaurants.
Why Do We Like TOST?
- ARR growth averaged 30.6% over the last year, showing customers are willing to take multi-year bets on its offerings
- Notable projected revenue growth of 22.6% for the next 12 months hints at market share gains
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
At $36.70 per share, Toast trades at 3.6x forward price-to-sales. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Napco (NSSC)
Net Cash Position: $93.78 million (11.3% of Market Cap)
Protecting everything from schools to government facilities since 1969, Napco Security Technologies (NASDAQ:NSSC) manufactures electronic security devices, access control systems, and communication services for intrusion and fire alarm systems.
Why Are We Backing NSSC?
- Impressive 11.8% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Robust free cash flow margin of 16.3% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety
- Returns on capital are growing as management capitalizes on its market opportunities
Napco’s stock price of $22.72 implies a valuation ratio of 14.8x forward price-to-earnings. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.