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. Keeping that in mind, here is one company with a net cash position that can leverage its balance sheet to grow and two best left off your watchlist.
Two Stocks to Sell:
DistributionNOW (DNOW)
Net Cash Position: $166 million (10.6% of Market Cap)
Spun off from National Oilwell Varco, DistributionNOW (NYSE:DNOW) provides distribution and supply chain solutions for the energy and industrial end markets.
Why Should You Dump DNOW?
- Sales tumbled by 2.8% annually over the last five years, showing market trends are working against its favor during this cycle
- Earnings per share have contracted by 6.3% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Free cash flow margin shrank by 4.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
DistributionNOW’s stock price of $14.83 implies a valuation ratio of 10.2x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why DNOW doesn’t pass our bar.
Matrix Service (MTRX)
Net Cash Position: $164.1 million (40.9% of Market Cap)
Founded in Oklahoma, Matrix Service (NASDAQ:MTRX) provides engineering, fabrication, construction, and maintenance services primarily to the energy and industrial markets.
Why Does MTRX Fall Short?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 10.7% annually over the last five years
- High input costs result in an inferior gross margin of 4.2% that must be offset through higher volumes
- Performance over the past five years was negatively impacted by new share issuances as its earnings per share dropped by 29.7% annually, worse than its revenue
Matrix Service is trading at $14.71 per share, or 19.2x forward P/E. Dive into our free research report to see why there are better opportunities than MTRX.
One Stock to Buy:
Live Oak Bancshares (LOB)
Net Cash Position: $524 million (35.7% of Market Cap)
Founded during the 2008 financial crisis with a vision to reimagine small business banking through technology, Live Oak Bancshares (NYSE:LOB) is a bank holding company that specializes in providing online banking services and SBA-guaranteed loans to small businesses across targeted industries nationwide.
Why Are We Bullish on LOB?
- Market share has increased this cycle as its 14.5% annual net interest income growth over the last four years was exceptional
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 59.2% over the last five years outstripped its revenue performance
- Annual tangible book value per share growth of 11.3% over the past five years was outstanding, reflecting strong capital accumulation this cycle
At $32.21 per share, Live Oak Bancshares trades at 1.3x forward P/B. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
When Trump unveiled his aggressive tariff plan in April 2024, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.
Don’t let fear keep you from great opportunities and take a look at Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.