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 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:
ScanSource (SCSC)
Net Cash Position: $13.66 million (1.2% of Market Cap)
Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ: SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.
Why Is SCSC Not Exciting?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4.9% annually over the last two years
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.4%
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $53.86 per share, ScanSource trades at 12.2x forward P/E. Dive into our free research report to see why there are better opportunities than SCSC.
Novavax (NVAX)
Net Cash Position: $495.3 million (33.8% of Market Cap)
Pioneering a nanoparticle technology that mimics the molecular structure of disease pathogens, Novavax (NASDAQ: NVAX) develops and commercializes protein-based vaccines for infectious diseases, with a primary focus on its COVID-19 vaccine and combination respiratory vaccine candidates.
Why Do We Steer Clear of NVAX?
- Sales tumbled by 22.6% annually over the last two years, showing market trends are working against it during this cycle
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Cash-burning history makes us doubt the long-term viability of its business model
Novavax’s stock price of $8.92 implies a valuation ratio of 5.2x forward price-to-sales. Check out our free in-depth research report to learn more about why NVAX doesn’t pass our bar.
One Stock to Buy:
Rocket Lab (RKLB)
Net Cash Position: $1.07 billion (2.3% of Market Cap)
Becoming the first private company in the Southern Hemisphere to reach space, Rocket Lab (NASDAQ: RKLB) offers rockets designed for launching small satellites.
Why Is RKLB a Good Business?
- Annual revenue growth of 55.1% over the past two years was outstanding, reflecting market share gains this cycle
- Operating margin improvement of 111.4 percentage points over the last five years demonstrates its ability to scale efficiently
- Negative free cash flow margin has improved over the last five years, showing the company is one step closer to financial self-sufficiency
Rocket Lab is trading at $75.86 per share, or 49.8x forward price-to-sales. Is now a good time to buy? Find out in our full research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
