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4 Top-Performing Liquid Stocks to Strengthen 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 the company is failing to use assets efficiently.
Hence, one may consider a company’s efficiency level in addition to its liquidity for identifying 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 13.
Here are four stocks out of the 13 that qualified for the screen:
Netflix, Inc (NFLX - Free Report) is considered a pioneer in the streaming space. Netflix streams movies, television shows and documentaries across a wide variety of genres and languages. At the end of the fourth quarter of 2023, the company had 260.28 million paid subscribers globally. The company added 13.12 million paid subscribers globally in fourth-quarter 2023, with a rise of 1% in average revenue per subscription. NFLX attributed the robust top-line growth to its paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general. Netflix is expected to continue dominating the streaming space, courtesy of its diversified content portfolio and heavy investments in the production and distribution of localized and foreign-language content. Stiff competition in the streaming space from the likes of Apple, Amazon Prime Video, Disney+, Peacock and Paramount+ is a headwind. The Zacks Consensus Estimate for NFLX’s 2024 bottom line is pegged at earnings of $16.93 per share, up 6.3% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 5.4%, on average.
Oceaneering International (OII - Free Report) is a leading provider of offshore equipment and technology solutions to the energy industry 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 segment is impressive. The company’s strong relationships with high-quality customers provide revenue visibility and business certainty. The Zacks Consensus Estimate for 2023 earnings is pegged at 86 cents per share, unchanged in the past 30 days. OII has a Growth Score of A.
Puma Biotechnology (PBYI - Free Report) is a small cancer biotech company. Its only marketed product, Nerlynx (neratinib), was launched in the United States in late July 2017 to treat early-stage HER2-positive breast cancer in patients who have been previously treated with Roche’s Herceptin-based adjuvant therapy. The company’s sole marketed drug, Nerlynx, is generating the majority of revenues with consistent sales performance in the United States. The company also acquired a clinical-stage candidate, alisertib, from Takeda. Ongoing studies focusing on alisertib's potential to target breast and small-cell lung cancers are progressing well. The successful development of this candidate could enhance PBYI’s position in the anticancer drug market and diversify its portfolio. The Zacks Consensus Estimate for its 2023 bottom line is pegged at 73 cents per share, up 1 cent in the past 60 days. PBYI has a Growth Score of A and a trailing four-quarter earnings surprise of 76.6%, on average.
GigaCloud Technology (GCT - Free Report) provides end-to-end B2B e-commerce solutions for big parcel merchandise worldwide. The company's marketplace brings together manufacturers (mainly in Asia) and resellers (in the United States, Asia and Europe) to implement cross-border transactions. The Zacks Consensus Estimate for its 2023 bottom line is pegged at $1.77 per share, calling for an improvement of 14.2% in the past 60 days. GCT has a Growth Score of A.
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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4 Top-Performing Liquid Stocks to Strengthen 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 the company is failing to use assets efficiently.
Hence, one may consider a company’s efficiency level in addition to its liquidity for identifying 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 13.
Here are four stocks out of the 13 that qualified for the screen:
Netflix, Inc (NFLX - Free Report) is considered a pioneer in the streaming space. Netflix streams movies, television shows and documentaries across a wide variety of genres and languages. At the end of the fourth quarter of 2023, the company had 260.28 million paid subscribers globally. The company added 13.12 million paid subscribers globally in fourth-quarter 2023, with a rise of 1% in average revenue per subscription. NFLX attributed the robust top-line growth to its paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general. Netflix is expected to continue dominating the streaming space, courtesy of its diversified content portfolio and heavy investments in the production and distribution of localized and foreign-language content. Stiff competition in the streaming space from the likes of Apple, Amazon Prime Video, Disney+, Peacock and Paramount+ is a headwind. The Zacks Consensus Estimate for NFLX’s 2024 bottom line is pegged at earnings of $16.93 per share, up 6.3% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 5.4%, on average.
Oceaneering International (OII - Free Report) is a leading provider of offshore equipment and technology solutions to the energy industry 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 segment is impressive. The company’s strong relationships with high-quality customers provide revenue visibility and business certainty. The Zacks Consensus Estimate for 2023 earnings is pegged at 86 cents per share, unchanged in the past 30 days. OII has a Growth Score of A.
Puma Biotechnology (PBYI - Free Report) is a small cancer biotech company. Its only marketed product, Nerlynx (neratinib), was launched in the United States in late July 2017 to treat early-stage HER2-positive breast cancer in patients who have been previously treated with Roche’s Herceptin-based adjuvant therapy. The company’s sole marketed drug, Nerlynx, is generating the majority of revenues with consistent sales performance in the United States. The company also acquired a clinical-stage candidate, alisertib, from Takeda. Ongoing studies focusing on alisertib's potential to target breast and small-cell lung cancers are progressing well. The successful development of this candidate could enhance PBYI’s position in the anticancer drug market and diversify its portfolio. The Zacks Consensus Estimate for its 2023 bottom line is pegged at 73 cents per share, up 1 cent in the past 60 days. PBYI has a Growth Score of A and a trailing four-quarter earnings surprise of 76.6%, on average.
GigaCloud Technology (GCT - Free Report) provides end-to-end B2B e-commerce solutions for big parcel merchandise worldwide. The company's marketplace brings together manufacturers (mainly in Asia) and resellers (in the United States, Asia and Europe) to implement cross-border transactions. The Zacks Consensus Estimate for its 2023 bottom line is pegged at $1.77 per share, calling for an improvement of 14.2% in the past 60 days. GCT has a Growth Score of A.
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.