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Add These 4 Top-Ranked Liquid Stocks to Strengthen Portfolio
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Identifying stocks that offer healthy returns may be tricky for investors. In such a scenario, one may consider liquidity levels, which 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 cannot utilize assets effectively. It is advisable to consider a company’s efficiency level and liquidity to identify potential 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 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:
Meta Platforms, Inc (META - Free Report) is the world’s biggest social media platform. The company is gaining from steady user growth across all regions, particularly Asia Pacific. Increasing engagement on its other platforms, such as Instagram, WhatsApp, Messenger and Facebook, has been a major growth catalyst. META is leveraging AI to recommend Reels content, which is driving traffic on Instagram and Facebook. Its innovative portfolio, which includes Threads, Reels, Llama 2, Ray-Ban Meta smart glass and mixed reality device Quest 3, is likely to aid prospects. Challenging macroeconomic conditions are a persistent concern for Meta’s advertising revenues. The Zacks Consensus Estimate for 2024 earnings is pegged at $19.94 per share, up 13.2% in the past 60 days. META has a Growth Score of B and a trailing four-quarter earnings surprise of 19.7%, on average.
Deckers Outdoor Corporation (DECK - Free Report) is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. The company sells products primarily under five proprietary brands — UGG, HOKA, Teva, Sanuk and Other brands (mainly comprising Koolaburra). Strength in the UGG and HOKA brands is driving top-line performance. Key strategic initiatives, including product innovation and brand assortment expansion, coupled with a robust focus on direct-to-consumer channels, are propelling its growth trajectory. Successful international market penetration and a strong wholesale segment contribute to its market diversification. Proactive consumer engagement strategies and omni-channel distribution bolster its competitive edge. The Zacks Consensus Estimate for its fiscal 2024 bottom line is pegged at $26.85 per share, up 13.7% in the past 60 days. DECK has a Growth Score of A and a trailing four-quarter earnings surprise of 32.1%, on average.
Perion Network (PERI - Free Report) is an Israel-based technology company that offers brands and publishers online advertising and search monetization solutions. The company is committed to providing data-driven execution, from high-impact ad formats to branded search and a unified social and mobile programmatic platform. The Zacks Consensus Estimate for its 2024 earnings is pegged at $3.34 per share, up 2 cents in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 12.9%, on average.
Carlisle Companies Incorporated (CSL - Free Report) is a diversified, global portfolio of niche brands and businesses with highly engineered and high-margin products. It engages in the design, manufacture and sale of a wide range of roofing and waterproofing products, engineered products and finishing equipment. The company is set to benefit from its focus on delivering innovative new products. Its diversified business structure enables it to tap opportunities and neutralize operating risks associated with a single market. Robust repair and remodel demand across the building envelope in commercial and residential markets augurs well for the CWT segment. Synergies from several buyouts are likely to drive top-line growth. Its shareholder-friendly policies are encouraging. The Zacks Consensus Estimate for its 2024 earnings is pegged at $18.44 per share, improved by 8.2% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 7.6%, 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 Strengthen Portfolio
Identifying stocks that offer healthy returns may be tricky for investors. In such a scenario, one may consider liquidity levels, which 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 cannot utilize assets effectively. It is advisable to consider a company’s efficiency level and liquidity to identify potential 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 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:
Meta Platforms, Inc (META - Free Report) is the world’s biggest social media platform. The company is gaining from steady user growth across all regions, particularly Asia Pacific. Increasing engagement on its other platforms, such as Instagram, WhatsApp, Messenger and Facebook, has been a major growth catalyst. META is leveraging AI to recommend Reels content, which is driving traffic on Instagram and Facebook. Its innovative portfolio, which includes Threads, Reels, Llama 2, Ray-Ban Meta smart glass and mixed reality device Quest 3, is likely to aid prospects. Challenging macroeconomic conditions are a persistent concern for Meta’s advertising revenues. The Zacks Consensus Estimate for 2024 earnings is pegged at $19.94 per share, up 13.2% in the past 60 days. META has a Growth Score of B and a trailing four-quarter earnings surprise of 19.7%, on average.
Deckers Outdoor Corporation (DECK - Free Report) is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. The company sells products primarily under five proprietary brands — UGG, HOKA, Teva, Sanuk and Other brands (mainly comprising Koolaburra). Strength in the UGG and HOKA brands is driving top-line performance. Key strategic initiatives, including product innovation and brand assortment expansion, coupled with a robust focus on direct-to-consumer channels, are propelling its growth trajectory. Successful international market penetration and a strong wholesale segment contribute to its market diversification. Proactive consumer engagement strategies and omni-channel distribution bolster its competitive edge. The Zacks Consensus Estimate for its fiscal 2024 bottom line is pegged at $26.85 per share, up 13.7% in the past 60 days. DECK has a Growth Score of A and a trailing four-quarter earnings surprise of 32.1%, on average.
Perion Network (PERI - Free Report) is an Israel-based technology company that offers brands and publishers online advertising and search monetization solutions. The company is committed to providing data-driven execution, from high-impact ad formats to branded search and a unified social and mobile programmatic platform. The Zacks Consensus Estimate for its 2024 earnings is pegged at $3.34 per share, up 2 cents in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 12.9%, on average.
Carlisle Companies Incorporated (CSL - Free Report) is a diversified, global portfolio of niche brands and businesses with highly engineered and high-margin products. It engages in the design, manufacture and sale of a wide range of roofing and waterproofing products, engineered products and finishing equipment. The company is set to benefit from its focus on delivering innovative new products. Its diversified business structure enables it to tap opportunities and neutralize operating risks associated with a single market. Robust repair and remodel demand across the building envelope in commercial and residential markets augurs well for the CWT segment. Synergies from several buyouts are likely to drive top-line growth. Its shareholder-friendly policies are encouraging. The Zacks Consensus Estimate for its 2024 earnings is pegged at $18.44 per share, improved by 8.2% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 7.6%, 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.