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5 Best-Performing Liquid Stocks for Alluring Returns in 2021
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Identifying stocks that offer healthy returns may sometimes pose a challenge to investors. In that case, one may take into account liquidity levels, which are considered a good indicator of a company’s financial health.
Liquidity is a measure of a company’s capability to meet its short-term debt obligations.
However, high liquidity may also suggest a company’s inefficiency in utilizing its assets properly. Thus, impressive liquidity positions and favorable efficiency levels imply a stock’s solid financial health.
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.)
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 12.
Here are five of the 12 stocks that qualified the screen:
Headquartered in Berwyn, PA, Trinseo S.A. (TSE - Free Report) is a well-known international materials company engaged in manufacturing of synthetic rubber, latex binders, and plastic products. The Zacks Consensus Estimate for its 2021 earnings has been revised upward by 30.8% over the past 30 days to $6.80 per share. The company has a Growth Score of A. It has a trailing four-quarter earnings surprise of 74.24%, on average.
Based in Hayward, CA, Ultra Clean Holdings, Inc. (UCTT - Free Report) is a notable designer, developer, manufacturer and tester of production tools, subsystems and modules for the semiconductor and display capital equipment industries. The Zacks Consensus Estimate for 2021 earnings has been revised 11.9% upward over the past 60 days to $3.39 per share. The company has a Growth Score of A. It has a trailing four-quarter earnings surprise of 30.82%, on average.
Southport, CT-based Sturm, Ruger & Company, Inc. (RGR - Free Report) is involved in designing, manufacturing and selling firearms under the Ruger name and trademark in the United States. The Zacks Consensus Estimate for its 2021 earnings has been revised 31.2% upward by to $4.58 in the past 60 days. The company has a Growth Score of A.
Domiciled in Bedford, MA, iRobot Corporation (IRBT - Free Report) designs, builds and sells robots in the United States and internationally. Its noteworthy offerings include Roomba floor vacuuming robots, Braava family of automatic floor mopping robots and Root robots that help children learn coding. The Zacks Consensus Estimate for its 2021 earnings has moved 31.5% north to $3.14 in the past 60 days. The company has a Growth Score of A. It has a trailing four-quarter earnings surprise of a whopping 228.19%, on average.
Based in Birmingham, AL, Hibbett Sports, Inc. (HIBB - Free Report) is a notable athletic-inspired retailer, typically catering to small counties with a population ranging from 25,000 to 75,000. Its merchandise assortment is focused on footwear, athletic equipment and apparel. The Zacks Consensus Estimate for fiscal 2022 earnings has improved 41.1% over the past 60 days to $5.05. Hibbett Sports has a Growth Score of B. It has a trailing four-quarter earnings surprise of 74.32%, 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.
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.
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5 Best-Performing Liquid Stocks for Alluring Returns in 2021
Identifying stocks that offer healthy returns may sometimes pose a challenge to investors. In that case, one may take into account liquidity levels, which are considered a good indicator of a company’s financial health.
Liquidity is a measure of a company’s capability to meet its short-term debt obligations.
However, high liquidity may also suggest a company’s inefficiency in utilizing its assets properly. Thus, impressive liquidity positions and favorable efficiency levels imply a stock’s solid financial health.
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 12.
Here are five of the 12 stocks that qualified the screen:
Headquartered in Berwyn, PA, Trinseo S.A. (TSE - Free Report) is a well-known international materials company engaged in manufacturing of synthetic rubber, latex binders, and plastic products. The Zacks Consensus Estimate for its 2021 earnings has been revised upward by 30.8% over the past 30 days to $6.80 per share. The company has a Growth Score of A. It has a trailing four-quarter earnings surprise of 74.24%, on average.
Based in Hayward, CA, Ultra Clean Holdings, Inc. (UCTT - Free Report) is a notable designer, developer, manufacturer and tester of production tools, subsystems and modules for the semiconductor and display capital equipment industries. The Zacks Consensus Estimate for 2021 earnings has been revised 11.9% upward over the past 60 days to $3.39 per share. The company has a Growth Score of A. It has a trailing four-quarter earnings surprise of 30.82%, on average.
Southport, CT-based Sturm, Ruger & Company, Inc. (RGR - Free Report) is involved in designing, manufacturing and selling firearms under the Ruger name and trademark in the United States. The Zacks Consensus Estimate for its 2021 earnings has been revised 31.2% upward by to $4.58 in the past 60 days. The company has a Growth Score of A.
Domiciled in Bedford, MA, iRobot Corporation (IRBT - Free Report) designs, builds and sells robots in the United States and internationally. Its noteworthy offerings include Roomba floor vacuuming robots, Braava family of automatic floor mopping robots and Root robots that help children learn coding. The Zacks Consensus Estimate for its 2021 earnings has moved 31.5% north to $3.14 in the past 60 days. The company has a Growth Score of A. It has a trailing four-quarter earnings surprise of a whopping 228.19%, on average.
Based in Birmingham, AL, Hibbett Sports, Inc. (HIBB - Free Report) is a notable athletic-inspired retailer, typically catering to small counties with a population ranging from 25,000 to 75,000. Its merchandise assortment is focused on footwear, athletic equipment and apparel. The Zacks Consensus Estimate for fiscal 2022 earnings has improved 41.1% over the past 60 days to $5.05. Hibbett Sports has a Growth Score of B. It has a trailing four-quarter earnings surprise of 74.32%, 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.