For Immediate Release
Chicago, IL – March 7, 2022 – Stocks in this week’s article are Diodes (
DIOD Quick Quote DIOD - Free Report) , Louisiana-Pacific Corp. ( LPX Quick Quote LPX - Free Report) , Skyline ( SKY Quick Quote SKY - Free Report) and SeaWorld Entertainment ( SEAS Quick Quote SEAS - Free Report) . 4 Top-Performing Liquid Stocks for Attractive Returns in 2022
Identifying stocks that offer healthy returns may sometimes prove to be tricky for investors. In such a scenario, one may consider liquidity levels that are a good indicator of a company’s financial health.
Liquidity measures a company’s ability to meet short-term debt obligations by converting assets into liquid cash and equivalents. These stocks have always been on investors’ radar, owing to their potential to offer alluring returns.
Nonetheless, one should be careful about investing in a stock with a high liquidity level as it may also suggest that the company is not able to utilize assets effectively. It is advisable to consider a company’s efficiency level along with liquidity to identify potential 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 short- and long-term debt obligations. A current ratio — also known as the 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 suggest that the company failed to utilize its assets significantly. Hence, a range of 1-3 is considered ideal.
Quick Ratio: Unlike the current ratio, the quick ratio — also called the “acid-test ratio" or the "quick assets ratio" — indicates a company’s ability to pay short-term obligations. It considers inventory excluding the current assets relative to current liabilities. Like the current ratio, a quick ratio of more than 1 is desirable. Cash Ratio: This is the most conservative ratio among the three, as it takes into account cash and cash equivalents as well as invested funds relative to current liabilities. It measures a company’s ability to meet current 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 desirable at all times but may not always represent a company’s financial condition.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1877383/4-top-performing-liquid-stocks-for-attractive-returns-in-2022 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. About Screen of the Week
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