For Immediate Release
Chicago, IL – March 13, 2020 - Stocks in this week’s article are
Dropbox, Inc. DBX, Enphase Energy, Inc. ( ENPH Quick Quote ENPH - Free Report) , Cohen & Steers, Inc. CNS, Telenav, Inc. TNAV and ExlService Holdings, Inc. EXLS. 5 Top-Ranked Stocks to Bet On for Alluring Returns
Identifying stocks that offer healthy returns may sometimes prove to be difficult for investors. In that case, one may take into account liquidity levels, which are 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. Stocks with high liquidity levels have always been in demand owing to their potential to provide maximum returns.
However, one should be careful 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 suggest that the company is failing to use its assets efficiently.
Therefore, in addition to liquidity level, an investor may also consider the efficiency of the company before investing in the stock. An efficient company with a favorable liquidity level may prove to be a profitable addition to one’s portfolio.
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.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/807810/5-topranked-liquid-stocks-to-bet-on-for-alluring-returns 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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