For Immediate Release
Chicago, IL – March 16, 2018 - Stocks in this week’s article include: athenahealth Inc. (ATHN - Free Report) , Commercial Vehicle Group Inc. (CVGI - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) and Shutterfly Inc. (SFLY - Free Report) .
Screen of the Week of Zacks Investment Research:
4 Top-Ranked Liquid Stocks to Snap Up Now
Investors may consider allocating their assets in stocks with favorable liquidity positions for big returns. Liquidity indicates a company’s capability of meeting debt obligations by converting assets into liquid cash and equivalents.
However, one should be cautious before investing in liquid stocks. While a high liquidity level may mean that the company is meeting its obligations at a faster rate compared to others in its domain, it may also indicate that the company is failing to use its assets efficiently.
Hence, one should consider the efficiency level of a company in addition to its liquidity to identify potential winners as this combination is indicative of underlying financial strength.
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 higher than 1 may point to sound financials, a high 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.
And that's what we're screening for today…
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/295690/4-topranked-liquid-stocks-to-snap-up-now
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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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