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 that don’t make the cut and some better choices instead.
nCino (NCNO)
Net Cash Position: $115.8 million (3.7% of Market Cap)
Founded in 2011 in North Carolina, nCino (NASDAQ:NCNO) makes cloud-based operating systems for banks and provides that software-as-a-service.
Why Are We Hesitant About NCNO?
- Estimated sales growth of 5.9% for the next 12 months implies demand will slow from its three-year trend
- Gross margin of 60.1% is below its competitors, leaving less money to invest in areas like marketing and R&D
- Persistent operating margin losses suggest the business manages its expenses poorly
nCino’s stock price of $27.32 implies a valuation ratio of 5.4x forward price-to-sales. To fully understand why you should be careful with NCNO, check out our full research report (it’s free).
Chegg (CHGG)
Net Cash Position: $8.02 million (4.6% of Market Cap)
Started as a physical textbook rental service, Chegg (NYSE:CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.
Why Do We Pass on CHGG?
- Services Subscribers have declined by 13.4% annually over the last two years, suggesting it may need to revamp its features or user experience to stay competitive
- Overall productivity fell over the last few years as its plummeting sales were accompanied by a decline in its EBITDA margin
- Performance over the past three years shows each sale was less profitable as its earnings per share dropped by 30.8% annually, worse than its revenue
At $1.66 per share, Chegg trades at 2.8x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than CHGG.
Strategic Education (STRA)
Net Cash Position: $63.16 million (3% of Market Cap)
Formed through the merger of Strayer Education and Capella Education in 2018, Strategic Education (NASDAQ:STRA) is a career-focused higher education provider.
Why Should You Sell STRA?
- Performance surrounding its domestic students has lagged its peers
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 6.6% annually while its revenue grew
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Strategic Education is trading at $89.41 per share, or 15.7x forward P/E. If you’re considering STRA for your portfolio, see our FREE research report to learn more.
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.
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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.