Why Wouldn’t You Buy These Cash-Rich Companies?: Zynga Inc (ZNGA) and More

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The recent surge in Groupon’s price from its $2.60 52-week low has made the company less attractive, but I still think it has legs to move higher. The company has now met or exceeded analyst estimates over the last three quarters. In addition, these analysts are still predicting very strong 25% annual growth over the next five years. The company also generated a strong $300 million in free cash flow this past year which is not too shabby at all. Since the company now trades at a still-enticing 1.1 times its enterprise value/EBITDA and price to expected growth rate, I think Groupon is a buy.

The Inside Scoop:

Analyzing a company first through its balance sheet can give an investor a great initial screening tool on whether or not the company is financially healthy. As described above, Zynga, Activision, and Groupon are three companies that have not only a sterling balance sheet, but some favorable valuations that should push their stocks higher in the foreseeable future.

The article Why Wouldn’t You Buy These Cash-Rich Companies? originally appeared on Fool.com and is written by Brian Gorban.

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