A cash-heavy balance sheet is often a sign of strength, but not always. Some companies avoid debt because they have weak business models, limited expansion opportunities, or inconsistent cash flow.
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. Keeping that in mind, here is one company with a net cash position that balances growth with stability and two best left off your watchlist.
Two Stocks to Sell:
Grand Canyon Education (LOPE)
Net Cash Position: $192.8 million (4.3% of Market Cap)
Founded in 1949, Grand Canyon Education (NASDAQ: LOPE) is an educational services provider known for its operation at Grand Canyon University.
Why Should You Dump LOPE?
- Number of students has disappointed over the past two years, indicating weak demand for its offerings
- Earnings per share lagged its peers over the last five years as they only grew by 7.2% annually
- Free cash flow margin is expected to remain in place over the coming year
Grand Canyon Education’s stock price of $166.59 implies a valuation ratio of 16.6x forward P/E. To fully understand why you should be careful with LOPE, check out our full research report (it’s free).
Hope Bancorp (HOPE)
Net Cash Position: $352.1 million (22.5% of Market Cap)
With roots in serving Korean-American communities and now expanded to a multi-ethnic clientele across 12 states, Hope Bancorp (NASDAQ: HOPE) operates Bank of Hope, providing commercial and retail banking services with a focus on serving multi-ethnic communities across the United States.
Why Is HOPE Risky?
- Flat net interest income over the last five years suggest it must find different ways to grow during this cycle
- Earnings per share were flat over the last five years and fell short of the peer group average
- Flat tangible book value per share over the last two years suggest it must find different ways to enhance shareholder value during this cycle
Hope Bancorp is trading at $12.23 per share, or 0.7x forward P/B. Check out our free in-depth research report to learn more about why HOPE doesn’t pass our bar.
One Stock to Buy:
Remitly (RELY)
Net Cash Position: $350.3 million (9.9% of Market Cap)
With Amazon founder Jeff Bezos as an early investor, Remitly (NASDAQ: RELY) is an online platform that enables consumers to safely and quickly send money globally.
Why Will RELY Beat the Market?
- Active Customers have increased by an average of 29.2% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Additional sales over the last three years increased its profitability as the 108% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin expanded by 34.7 percentage points over the last few years, providing additional flexibility for investments and share buybacks/dividends
At $16.78 per share, Remitly trades at 9.4x forward EV/EBITDA. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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