Liquidity 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 enough 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 its assets competently/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. This ratio is used for measuring a company’s potential to meet both short- and long-term debt obligations. Thus, a current ratio — also known as working capital ratio — below 1 indicates that the company has more liabilities than assets. However, a high current ratio does not always indicate that the company is in good financial shape. It may also mean that the company has failed to utilize its assets significantly. Hence, a range of 1 to 3 is considered ideal.
Quick Ratio: Unlike current ratio, quick ratio — also called “acid-test ratio" or "quick assets ratio" — indicates a company’s ability to pay short-term obligations. It considers inventory excluding current assets relative to current liabilities. Like the current ratio, a quick ratio of greater than 1 is desirable.
Cash Ratio: This is the most conservative ratio among the three, as it takes into account only cash and cash equivalents, and invested funds relative to current liabilities. It measures a company’s ability to meet its current debt obligations using the most liquid of assets. Though a cash ratio of more than 1 may point to sound financials, a higher number may indicate inefficiency in cash utilization.
So, a ratio greater than 1 is desirable at all times but may not always appropriately represent a company’s financial condition.
Screening Parameters
In order to pick the best of the lot, we have added asset utilization, which is a widely used measure of a company’s efficiency, as one of the screening criteria. Asset utilization is the ratio of total sales over 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.
In order to ensure that these liquid and efficient stocks have solid growth potential, we have added our proprietary Growth Style Score to the screen.
Current Ratio, Quick Ratio and Cash Ratio between 1 and 3 (While liquidity ratios of greater than 1 are desirable, significantly high ratios may indicate inefficiency.)
Asset utilization greater than 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 when combined with a Zacks Rank #1 or 2 handily beat other stocks.)
These criteria have narrowed down the universe of more than 7,700 stocks to only eight.
Here are five of the eight stocks that qualified the screen:
Baltimore, MD-based Medifast (MED - Free Report) is a leading manufacturer and distributor of clinically-proven healthy living products and programs. The company produces, distributes and sells weight loss, weight management and healthy living products through its direct online channels as well as franchise weight control centers. The Zacks Consensus Estimate for its 2021 earnings is pegged at $13.47 per share, up 23.7% over the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 12.65%, on average.
Based in Las Vegas, NV, Boyd Gaming Corporation (BYD - Free Report) is a multi-jurisdictional gaming company, which operates primarily through three segments: Las Vegas Locals, Downtown Las Vegas, and Midwest & South. The Zacks Consensus Estimate for its 2021 earnings has been revised 52.6% upward over the past 60 days to $3.25 per share. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 76.67%, on average.
Headquartered in Duluth, GA, National Vision Holdings (EYE - Free Report) is one of the leading and rapidly growing optical retailers in the United States. The company holds a solid position in the attractive value segment of the U.S. optical retail industry. National Vision provides budget-friendly eye exams, eyeglasses and contact lenses to low-income consumers and aims at making eye care and eyewear reasonable for all Americans. The Zacks Consensus Estimate for its 2021 earnings is pegged at $1.09 per share, up 21.1% over the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 106.84%, on average.
Northville, MI-based Gentherm (THRM - Free Report) designs, develops, manufactures, and markets products utilizing innovative thermal management technologies, including climate comfort system solutions and patient temperature management systems. The Zacks Consensus Estimate for its 2021 earnings has been revised upward by 21.8% over the past 60 days to $3.80 per share. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 71.76%, on average.
Waukesha, WI-based Generac Holdings (GNRC - Free Report) is engaged in designing, manufacturing, and selling energy storage systems, power generation equipment, among other power products for the light commercial and residential, and industrial markets globally. The Zacks Consensus Estimate for its 2021 earnings has been revised upward by 15.6% over the past 60 days to $10.09 per share. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 26.11%, on average.
Get the remaining stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
The Research Wizard is a great place to begin. It's 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 to the Research Wizard today.
Disclosure: Officers, directors and/or 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 that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Liquidity 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 enough 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 its assets competently/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. This ratio is used for measuring a company’s potential to meet both short- and long-term debt obligations. Thus, a current ratio — also known as working capital ratio — below 1 indicates that the company has more liabilities than assets. However, a high current ratio does not always indicate that the company is in good financial shape. It may also mean that the company has failed to utilize its assets significantly. Hence, a range of 1 to 3 is considered ideal.
Quick Ratio: Unlike current ratio, quick ratio — also called “acid-test ratio" or "quick assets ratio" — indicates a company’s ability to pay short-term obligations. It considers inventory excluding current assets relative to current liabilities. Like the current ratio, a quick ratio of greater than 1 is desirable.
Cash Ratio: This is the most conservative ratio among the three, as it takes into account only cash and cash equivalents, and invested funds relative to current liabilities. It measures a company’s ability to meet its current debt obligations using the most liquid of assets. Though a cash ratio of more than 1 may point to sound financials, a higher number may indicate inefficiency in cash utilization.
So, a ratio greater than 1 is desirable at all times but may not always appropriately represent a company’s financial condition.
Screening Parameters
In order to pick the best of the lot, we have added asset utilization, which is a widely used measure of a company’s efficiency, as one of the screening criteria. Asset utilization is the ratio of total sales over 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.
In order to ensure that these liquid and efficient stocks have solid growth potential, we have added our proprietary Growth Style Score to the screen.
Current Ratio, Quick Ratio and Cash Ratio between 1 and 3 (While liquidity ratios of greater than 1 are desirable, significantly high ratios may indicate inefficiency.)
Asset utilization greater than 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 when combined with a Zacks Rank #1 or 2 handily beat other stocks.)
These criteria have narrowed down the universe of more than 7,700 stocks to only eight.
Here are five of the eight stocks that qualified the screen:
Baltimore, MD-based Medifast (MED - Free Report) is a leading manufacturer and distributor of clinically-proven healthy living products and programs. The company produces, distributes and sells weight loss, weight management and healthy living products through its direct online channels as well as franchise weight control centers. The Zacks Consensus Estimate for its 2021 earnings is pegged at $13.47 per share, up 23.7% over the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 12.65%, on average.
Based in Las Vegas, NV, Boyd Gaming Corporation (BYD - Free Report) is a multi-jurisdictional gaming company, which operates primarily through three segments: Las Vegas Locals, Downtown Las Vegas, and Midwest & South. The Zacks Consensus Estimate for its 2021 earnings has been revised 52.6% upward over the past 60 days to $3.25 per share. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 76.67%, on average.
Headquartered in Duluth, GA, National Vision Holdings (EYE - Free Report) is one of the leading and rapidly growing optical retailers in the United States. The company holds a solid position in the attractive value segment of the U.S. optical retail industry. National Vision provides budget-friendly eye exams, eyeglasses and contact lenses to low-income consumers and aims at making eye care and eyewear reasonable for all Americans. The Zacks Consensus Estimate for its 2021 earnings is pegged at $1.09 per share, up 21.1% over the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 106.84%, on average.
Northville, MI-based Gentherm (THRM - Free Report) designs, develops, manufactures, and markets products utilizing innovative thermal management technologies, including climate comfort system solutions and patient temperature management systems. The Zacks Consensus Estimate for its 2021 earnings has been revised upward by 21.8% over the past 60 days to $3.80 per share. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 71.76%, on average.
Waukesha, WI-based Generac Holdings (GNRC - Free Report) is engaged in designing, manufacturing, and selling energy storage systems, power generation equipment, among other power products for the light commercial and residential, and industrial markets globally. The Zacks Consensus Estimate for its 2021 earnings has been revised upward by 15.6% over the past 60 days to $10.09 per share. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 26.11%, on average.
Get the remaining stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.
The Research Wizard is a great place to begin. It's 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 to the Research Wizard today.
Disclosure: Officers, directors and/or 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 that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Get the latest research report on BYD - FREE
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