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 balances growth with stability and two best left off your watchlist.
Two Stocks to Sell:
Regeneron (REGN)
Net Cash Position: $5.64 billion (9.8% 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 Give Us Pause?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 6.7% over the last two years was below our standards for the healthcare sector
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 12.3 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
Regeneron is trading at $548.98 per share, or 13.7x forward P/E. If you’re considering REGN for your portfolio, see our FREE research report to learn more.
CoStar (CSGP)
Net Cash Position: $3.04 billion (9.5% of Market Cap)
With a research department that makes over 10,000 property updates daily to its 35-year-old database, CoStar Group (NASDAQ: CSGP) provides comprehensive real estate data, analytics, and online marketplaces for commercial and residential properties in the U.S. and U.K.
Why Are We Wary of CSGP?
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 23.6 percentage points
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 5% annually while its revenue grew
- Free cash flow margin dropped by 23.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $74.54 per share, CoStar trades at 71.4x forward P/E. Check out our free in-depth research report to learn more about why CSGP doesn’t pass our bar.
One Stock to Buy:
Comfort Systems (FIX)
Net Cash Position: $136.9 million (0.9% of Market Cap)
Formed through the merger of 12 companies, Comfort Systems (NYSE: FIX) provides mechanical and electrical contracting services.
Why Will FIX Outperform?
- Backlog has averaged 30.5% growth over the past two years, showing it has a pipeline of unfulfilled orders that will support revenue in the future
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 68.2% annually
- Improving returns on capital reflect management’s ability to monetize investments
Comfort Systems’s stock price of $439.15 implies a valuation ratio of 23.5x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive 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 5 Growth Stocks for this month. 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.
