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Add These 4 Top-Ranked Liquid Stocks to Strengthen Portfolio
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Building a portfolio with stocks that have strong liquidity levels will likely work for investors seeking healthy returns, especially in the current volatile market scenario.
Liquidity measures a company’s capability to meet its short-term debt obligations. Stocks with high liquidity levels have always been in demand, owing to their potential to provide maximum returns.
However, one should be careful about investing in a stock with a high liquidity level. High liquidity may also indicate that the company cannot utilize its assets competently.
Besides sufficient cash, an investor might also consider a company’s capital deployment abilities before investing in the stock. A healthy company with favorable liquidity may be a profitable pick for one’s portfolio.
Measures to Identify Liquid Stocks
Current Ratio: It measures current assets relative to current liabilities. The ratio gauges a company’s potential to meet short- and long-term debt obligations. A current ratio — the working capital ratio — below 1 indicates that the company has more liabilities than assets. However, a high current ratio does not always suggest that the company is in good financial shape. It may also indicate that the firm failed to utilize its assets significantly. Hence, a range of 1-3 is considered ideal.
Quick Ratio: Unlike the current ratio, the quick ratio — the ‘acid-test ratio’ or ‘quick assets ratio’ — indicates a company’s ability to pay short-term obligations. It considers inventory, excluding the current assets relative to current liabilities. A quick ratio of more than 1 is desirable, like the current ratio.
Cash Ratio: This is the most conservative ratio among the three, considering cash and cash equivalents and invested funds relative to current liabilities. It measures a company’s ability to meet existing debt obligations using the most liquid assets. Though a cash ratio of more than 1 may suggest sound financials, a higher number may indicate inefficiency in cash utilization.A ratio greater than 1 is always desirable but may not always represent a company’s financial condition.
Screening Parameters
To pick the best of the lot, we have added asset utilization — a widely used measure of a company’s efficiency — as one of the screening criteria. Asset utilization is the ratio of total sales in the past 12 months to the last four-quarter average of total assets. Though this ratio varies across industries, companies with a ratio higher than their respective industries can be considered efficient. We added our proprietary Growth Style Score to the screen to ensure these liquid and efficient stocks have solid growth potential.
Current Ratio, Quick Ratio and Cash Ratio between 1 and 3 (While liquidity ratios greater than 1 are desirable, significantly high ratios may indicate inefficiency.)
Asset utilization is more significant than the industry average (Higher asset utilization than the industry average indicates a company’s efficiency.)
Growth Score less than or equal to B (Back-tested results show that stocks with a Growth Score of A or B handily beat other stocks when combined with a Zacks Rank #1 or 2.)
These criteria have narrowed the universe of more than 7,700 stocks to only seven.
Here are four of the seven stocks that qualified for the screen:
Fluor Corporation (FLR - Free Report) provides engineering, procurement, construction and maintenance services (EPCM) through several subsidiaries. Fluor also provides operation and maintenance services to major industrial clients. The company’s performance benefits from solid engineering and construction solutions demand. Substantial contributions from the Energy Solutions and Urban Solutions segments are driving the top line performance. Fluor's total new awards rose compared with the year-ago period in the last reported quarter. New awards also demonstrate that clients are moving forward with capital spending plans in a challenging business environment. Given the strong underlying performance of the company’s non-legacy portfolio and large Energy Solutions projects, Fluor lifted its expectations for 2023. The Zacks Consensus Estimate for Fluor’s 2023 earnings has been revised upward to $1.98 per share from $1.74 in the past 60 days. The company has a Growth Score of B.
NVIDIA Corporation (NVDA - Free Report) is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit or GPU. The company’s performance is driven by solid revenue growth across its datacenter end market, which is gaining from increasing investments in generative AI. The company’s Datacenter business is driven by the growing adoption of cloud-based solutions amid the growing hybrid working trend. The strong demand for its chips from large cloud service and consumer internet companies bodes well. The Zacks Consensus Estimate for its fiscal 2024 bottom line is pegged at $10.67 per share, suggesting an improvement of 37% in the past 60 days. NVDA has a Growth Score of A and a trailing four-quarter earnings surprise of 9.8%, on average.
Sprinklr (CXM - Free Report) provides modern enterprises with a unified customer experience management platform. Sprinklr’s advanced AI-powered platform aids clients in delivering human experiences to customers all the time across all modern communication channels. The company’s client base includes companies like Microsoft, P&G, and Samsung. The Zacks Consensus Estimate for its fiscal 2024 bottom line is pegged at 30 cents per share, improved from earnings of 21 cents in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 275%, on average.
Surmodics Inc (SRDX - Free Report) is a leading provider of medical device and In Vitro Diagnostics (IVD) technologies to the healthcare industry. It reports through two segments — Medical Devices and IVD. Surmodics' strength in its thrombectomy portfolio is encouraging. Its continued progress concerning clinical trials also looks promising. A strong liquidity position is an added plus. The Zacks Consensus Estimate for fiscal 2024 earnings is pegged at a loss of 67 cents per share compared with a loss of $1.03 60 days ago. SRDX has a Growth Score of B and a trailing four-quarter earnings surprise of 71.2%, on average.
Get the remaining stocks on the list and start testing this and other ideas. It can all be done with the Research Wizard stock picking and back-testing software.
The Research Wizard is a great place to begin and easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in and see what gems come out.
Disclosure: Officers, directors and employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options mentioned in this material.
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Add These 4 Top-Ranked Liquid Stocks to Strengthen Portfolio
Building a portfolio with stocks that have strong liquidity levels will likely work for investors seeking healthy returns, especially in the current volatile market scenario.
Liquidity measures a company’s capability to meet its short-term debt obligations. Stocks with high liquidity levels have always been in demand, owing to their potential to provide maximum returns.
However, one should be careful about investing in a stock with a high liquidity level. High liquidity may also indicate that the company cannot utilize its assets competently.
Besides sufficient cash, an investor might also consider a company’s capital deployment abilities before investing in the stock. A healthy company with favorable liquidity may be a profitable pick for one’s portfolio.
Measures to Identify Liquid Stocks
Current Ratio: It measures current assets relative to current liabilities. The ratio gauges a company’s potential to meet short- and long-term debt obligations. A current ratio — the working capital ratio — below 1 indicates that the company has more liabilities than assets. However, a high current ratio does not always suggest that the company is in good financial shape. It may also indicate that the firm failed to utilize its assets significantly. Hence, a range of 1-3 is considered ideal.
Quick Ratio: Unlike the current ratio, the quick ratio — the ‘acid-test ratio’ or ‘quick assets ratio’ — indicates a company’s ability to pay short-term obligations. It considers inventory, excluding the current assets relative to current liabilities. A quick ratio of more than 1 is desirable, like the current ratio.
Cash Ratio: This is the most conservative ratio among the three, considering cash and cash equivalents and invested funds relative to current liabilities. It measures a company’s ability to meet existing debt obligations using the most liquid assets. Though a cash ratio of more than 1 may suggest sound financials, a higher number may indicate inefficiency in cash utilization.A ratio greater than 1 is always desirable but may not always represent a company’s financial condition.
Screening Parameters
To pick the best of the lot, we have added asset utilization — a widely used measure of a company’s efficiency — as one of the screening criteria. Asset utilization is the ratio of total sales in the past 12 months to the last four-quarter average of total assets. Though this ratio varies across industries, companies with a ratio higher than their respective industries can be considered efficient.
We added our proprietary Growth Style Score to the screen to ensure these liquid and efficient stocks have solid growth potential.
Current Ratio, Quick Ratio and Cash Ratio between 1 and 3 (While liquidity ratios greater than 1 are desirable, significantly high ratios may indicate inefficiency.)
Asset utilization is more significant than the industry average (Higher asset utilization than the industry average indicates a company’s efficiency.)
Zacks Rank equal to #1 (Only Strong Buy-rated stocks can get through). You can see the complete list of today’s Zacks #1 Rank stocks here.
Growth Score less than or equal to B (Back-tested results show that stocks with a Growth Score of A or B handily beat other stocks when combined with a Zacks Rank #1 or 2.)
These criteria have narrowed the universe of more than 7,700 stocks to only seven.
Here are four of the seven stocks that qualified for the screen:
Fluor Corporation (FLR - Free Report) provides engineering, procurement, construction and maintenance services (EPCM) through several subsidiaries. Fluor also provides operation and maintenance services to major industrial clients. The company’s performance benefits from solid engineering and construction solutions demand. Substantial contributions from the Energy Solutions and Urban Solutions segments are driving the top line performance. Fluor's total new awards rose compared with the year-ago period in the last reported quarter. New awards also demonstrate that clients are moving forward with capital spending plans in a challenging business environment. Given the strong underlying performance of the company’s non-legacy portfolio and large Energy Solutions projects, Fluor lifted its expectations for 2023. The Zacks Consensus Estimate for Fluor’s 2023 earnings has been revised upward to $1.98 per share from $1.74 in the past 60 days. The company has a Growth Score of B.
NVIDIA Corporation (NVDA - Free Report) is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit or GPU. The company’s performance is driven by solid revenue growth across its datacenter end market, which is gaining from increasing investments in generative AI. The company’s Datacenter business is driven by the growing adoption of cloud-based solutions amid the growing hybrid working trend. The strong demand for its chips from large cloud service and consumer internet companies bodes well. The Zacks Consensus Estimate for its fiscal 2024 bottom line is pegged at $10.67 per share, suggesting an improvement of 37% in the past 60 days. NVDA has a Growth Score of A and a trailing four-quarter earnings surprise of 9.8%, on average.
Sprinklr (CXM - Free Report) provides modern enterprises with a unified customer experience management platform. Sprinklr’s advanced AI-powered platform aids clients in delivering human experiences to customers all the time across all modern communication channels. The company’s client base includes companies like Microsoft, P&G, and Samsung. The Zacks Consensus Estimate for its fiscal 2024 bottom line is pegged at 30 cents per share, improved from earnings of 21 cents in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 275%, on average.
Surmodics Inc (SRDX - Free Report) is a leading provider of medical device and In Vitro Diagnostics (IVD) technologies to the healthcare industry. It reports through two segments — Medical Devices and IVD. Surmodics' strength in its thrombectomy portfolio is encouraging. Its continued progress concerning clinical trials also looks promising. A strong liquidity position is an added plus. The Zacks Consensus Estimate for fiscal 2024 earnings is pegged at a loss of 67 cents per share compared with a loss of $1.03 60 days ago. SRDX has a Growth Score of B and a trailing four-quarter earnings surprise of 71.2%, on average.
Get the remaining stocks on the list and start testing this and other ideas. It can all be done with the Research Wizard stock picking and back-testing software.
The Research Wizard is a great place to begin and easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in and see what gems come out.
Click here to sign up for a free trial of the Research Wizard today.
Disclosure: Officers, directors and employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.