A lot of investors like to focus on the revenue and profit of a business. The profit and loss statement of a company is important, but so is the balance sheet (and cash flow statement). ASX shares with a lot of cash can be resilient and grow, even in a downturn.
Did you know that Bill Gates used to ensure that Microsoft had enough cash to keep paying expenses for 12 months even if no revenue was coming in?
While that doesn't have to be a rule that a company lives by, it's a useful way to think about why balance sheets can be important. Businesses can also benefit from a cash pile by making acquisitions of financially distressed competitors during a recession.
With that in mind, these are five ASX shares that have good balance sheets (although today isn't necessarily the best time to buy them all).
Altium Limited (ASX: ALU)
Altium is an ASX tech share that provides electronic PCB design software to engineers and organisations around the world. Clients include Space X, NASA and CSIRO.
At the end of the 2023 financial year, the company said that it had a cash balance of US$201 million and no debt. Considering its net assets amounted to US$304 million, the cash makes up a significant portion of the balance sheet. It made free cash flow of $52 million in FY23, with a large part of that paid to shareholders as a dividend.
Pro Medicus Ltd (ASX: PME)
Pro Medicus is an ASX share that describes itself as a "leading healthcare informatics company", providing a "full range of medical imaging software and services to hospitals, imaging centres and health care groups worldwide."
At the end of FY23, Pro Medicus had $121.5 million of cash and investments, with no debt. It generated net operating cash flow of $62.5 million in FY23, enabling it to pay a bigger dividend and increase its cash balance.
Pilbara Minerals Ltd (ASX: PLS)
Pilbara Minerals is one of the largest ASX lithium shares, with all of the company's lithium mining done in Australia.
In FY23 it benefited enormously from the strong lithium prices, enabling it to generate strong earnings. It finished the 2023 financial year with $3.3 billion of cash. The business is using that money to fund its growth projects as well as pay dividends to shareholders.
At the time of writing the Pilbara Minerals share price has fallen around 30% since 10 August and I'm thinking this week could be the right time to add it to my portfolio.
Australian Ethical Investment Ltd (ASX: AEF)
This ASX share is a fund manager that aims to provide investment products that only invest in ethical businesses. Its funds under management (FUM) is benefiting from the steady growth of superannuation contributions.
At the end of FY23, it had $21.1 million of cash from its balance sheet, with the company generating net operating cash flow of $16.2 million. It also has no debt.
Siteminder Ltd (ASX: SDR)
This company provides software to hotels around the world and is seeing a strong recovery of demand following the end of COVID-19 restrictions.
At the end of FY23, the business had cash of $53 million and no debt. Considering the net assets of the business came to $77 million, we can see that cash makes up a significant part of the overall balance sheet.
