3 Cash-Heavy Stocks with Questionable Fundamentals
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.
Just because a business has cash doesn’t mean it’s a good investment. Luckily, StockStory is here to help you separate the winners from the losers. Keeping that in mind, here are three companies with net cash positions to avoid and some better alternatives instead.
Nextdoor (NXDR)
Net Cash Position: $376.7 million (46.2% of Market Cap)
Helping residents figure out what's happening on their block in real time, Nextdoor (NYSE:KIND) is a social network that connects neighbors with each other and with local businesses.
Why Is NXDR Not Exciting?
- May need to improve its platform and marketing strategy as its 6.5% average growth in weekly active users underwhelmed
- Poor expense management has led to EBITDA margin losses
- Cash-burning history makes us doubt the long-term viability of its business model
At $2.11 per share, Nextdoor trades at 3.7x forward price-to-gross profit. To fully understand why you should be careful with NXDR, check out our full research report (it’s free for active Edge members).
Insperity (NSP)
Net Cash Position: $4 million (0.3% of Market Cap)
Pioneering the professional employer organization (PEO) industry it helped establish, Insperity (NYSE:NSP) provides human resources outsourcing services to small and medium-sized businesses, handling payroll, benefits, compliance, and HR administration.
Why Are We Out on NSP?
- Muted 2.8% annual revenue growth over the last two years shows its demand lagged behind its business services peers
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 18.7% annually
- Free cash flow margin shrank by 4.3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Insperity’s stock price of $38.63 implies a valuation ratio of 21.8x forward P/E. If you’re considering NSP for your portfolio, see our FREE research report to learn more.
State Street (STT)
Net Cash Position: $63.16 billion (175% of Market Cap)
Dating back to 1792 when Boston's Long Wharf was the center of global shipping and trade, State Street (NYSE:STT) provides custody, investment management, and other financial services to institutional investors like pension funds, asset managers, and central banks worldwide.
Why Does STT Fall Short?
- Sizable revenue base leads to growth challenges as its 3.1% annual revenue increases over the last five years fell short of other financials companies
- Earnings per share lagged its peers over the last five years as they only grew by 7.3% annually
State Street is trading at $129.08 per share, or 11.6x forward P/E. Read our free research report to see why you should think twice about including STT in your portfolio.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in 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 244% over the last five years (as of June 30, 2025).
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