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Add These 4 Top-Ranked Liquid Stocks to Enrich Your Portfolio
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The liquidity of a stock is an important parameter that many investors tend to ignore. It primarily determines a company’s capability to meet debt obligations by converting assets into liquid cash and equivalents.
These stocks have always been in demand owing to their potential to provide maximum returns. However, one should be alert before investing in such stocks. While a high liquidity level may imply that the company is clearing its dues at a faster rate compared with peers, it may also indicate that it is failing to use its assets efficiently.
Hence, one may consider a company’s efficiency level in addition to its liquidity to identify prospective winners.
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 eight.
Here are four of the eight stocks that qualified for the screen:
American Public Education, Inc (APEI - Free Report) is an online and campus-based post-secondary education provider. The company serves approximately 108,400 students through three subsidiary institutions — American Public University System (APUS), Rasmussen University (RU) and Hondros College of Nursing (HCN). Increased demand for affordable online higher education and nursing programs bodes well for the American Public. The APUS segment has been benefiting from the increase in military-related registrations from students utilizing TA and improvements made by the Army to the ArmyIgnitED system. For third-quarter 2023, APEI expects total revenues to be between -1% and 1% year over year to between $148.3 million and $150.3 million. It anticipates an adjusted loss of 32-24 cents per share compared with a loss of 20 cents reported a year ago. Adjusted EBITDA is expected to be within $8.4-$10.4 million compared with $9.5 million reported in the prior-year quarter. The Zacks Consensus Estimate for APEI’s 2023 bottom line is pegged at a loss of $3.51 per share, suggesting an improvement from a loss of $6.08 reported in the previous year. The company has a Growth Score of A.
NVIDIA Corporation (NVDA - Free Report) is the worldwide leader in visual computing technologies and an 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 $10.74 per share, suggesting an increase of 0.7% in the past 60 days. NVDA has a Growth Score of A and a trailing four-quarter earnings surprise of 9.8%, on average.
Oceaneering International (OII - Free Report) is a leading provider of integrated technology solutions and is active at all phases of the offshore oilfield lifecycle. Oceaneering’s geographically diversified asset base spread across the United States and the rest of the world and its revenues — evenly split between international and domestic operations — lowers its risk profile. The outlook for the company’s ‘Subsea Robotics unit is particularly impressive. The unit provides cutting-edge technology solutions for remote working and should perform well in growing international activity. Besides, Oceaneering's strong relationships with high-quality customers provide revenue visibility and business certainty. The Zacks Consensus Estimate for 2023 earnings is pegged at 94 cents per share, up 3.3% in the past 60 days. OII has a Growth Score of B.
Vimeo (VMEO - Free Report) provides video software solutions. The company's platform enables any professional, team and organization to unlock the power of video to create, collaborate and communicate. The Zacks Consensus Estimate for 2023 earnings is pegged at earnings of 8 cents per share, suggesting an improvement from a loss of 9 cents in the past 60 days. VMEO has a Growth Score of A and a trailing four-quarter earnings surprise of 122.7%, 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 Enrich Your Portfolio
The liquidity of a stock is an important parameter that many investors tend to ignore. It primarily determines a company’s capability to meet debt obligations by converting assets into liquid cash and equivalents.
These stocks have always been in demand owing to their potential to provide maximum returns. However, one should be alert before investing in such stocks. While a high liquidity level may imply that the company is clearing its dues at a faster rate compared with peers, it may also indicate that it is failing to use its assets efficiently.
Hence, one may consider a company’s efficiency level in addition to its liquidity to identify prospective winners.
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 eight.
Here are four of the eight stocks that qualified for the screen:
American Public Education, Inc (APEI - Free Report) is an online and campus-based post-secondary education provider. The company serves approximately 108,400 students through three subsidiary institutions — American Public University System (APUS), Rasmussen University (RU) and Hondros College of Nursing (HCN). Increased demand for affordable online higher education and nursing programs bodes well for the American Public. The APUS segment has been benefiting from the increase in military-related registrations from students utilizing TA and improvements made by the Army to the ArmyIgnitED system. For third-quarter 2023, APEI expects total revenues to be between -1% and 1% year over year to between $148.3 million and $150.3 million. It anticipates an adjusted loss of 32-24 cents per share compared with a loss of 20 cents reported a year ago. Adjusted EBITDA is expected to be within $8.4-$10.4 million compared with $9.5 million reported in the prior-year quarter. The Zacks Consensus Estimate for APEI’s 2023 bottom line is pegged at a loss of $3.51 per share, suggesting an improvement from a loss of $6.08 reported in the previous year. The company has a Growth Score of A.
NVIDIA Corporation (NVDA - Free Report) is the worldwide leader in visual computing technologies and an 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 $10.74 per share, suggesting an increase of 0.7% in the past 60 days. NVDA has a Growth Score of A and a trailing four-quarter earnings surprise of 9.8%, on average.
Oceaneering International (OII - Free Report) is a leading provider of integrated technology solutions and is active at all phases of the offshore oilfield lifecycle. Oceaneering’s geographically diversified asset base spread across the United States and the rest of the world and its revenues — evenly split between international and domestic operations — lowers its risk profile. The outlook for the company’s ‘Subsea Robotics unit is particularly impressive. The unit provides cutting-edge technology solutions for remote working and should perform well in growing international activity. Besides, Oceaneering's strong relationships with high-quality customers provide revenue visibility and business certainty. The Zacks Consensus Estimate for 2023 earnings is pegged at 94 cents per share, up 3.3% in the past 60 days. OII has a Growth Score of B.
Vimeo (VMEO - Free Report) provides video software solutions. The company's platform enables any professional, team and organization to unlock the power of video to create, collaborate and communicate. The Zacks Consensus Estimate for 2023 earnings is pegged at earnings of 8 cents per share, suggesting an improvement from a loss of 9 cents in the past 60 days. VMEO has a Growth Score of A and a trailing four-quarter earnings surprise of 122.7%, 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 is available at: https://www.zacks.com/performance.