We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
4 Top-Ranked Liquid Bets to Build a Successful Portfolio
Read MoreHide Full Article
A company with strong liquidity always has the potential to provide higher returns as stable financial resources help fuel business growth. It indicates a company’s capability of meeting debt obligations by converting its assets into liquid cash and equivalents.
However, one should be careful of investing in a stock with high liquidity level as it may also indicate that the company is failing to utilize its assets efficiently.
Therefore, in addition to the sufficient cash in hand, an investor may also consider a company’s capital deployment abilities before putting his money on its stock. A healthy company with favorable liquidity may prove to be a profitable pick for 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.
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 four of the 12 stocks that qualified the screen:
Based in Luxembourg, MagnaChip Semiconductor Corp. (MX - Free Report) designs, manufactures and sells analog and mixed-signal semiconductor platform solutions for communications, Internet of Things, consumer, industrial and automotive applications. The Zacks Consensus Estimate for 2020 earnings has moved north by 4.7% to 89 cents in the past 60 days. The company has a Growth Score of A. It has a trailing four-quarter positive earnings surprise of 82.59%, on average.
Headquartered in New York, NY, PJT Partners Inc. (PJT - Free Report) is a global advisory-focused investment bank. The Zacks Consensus Estimate for 2020 earnings per share moved up 3.8% to $3.04 over the past 30 days. The company has a Growth Score of A. Further, the consensus mark for current-year sales indicate an improvement of 15.4% year over year.
Domiciled in Bellingham, WA, eXp World Holdings Inc. (EXPI - Free Report) is the holding company for eXp Realty and VirBELA. The company provides cloud-based real estate brokerage services primarily in the United States and Canada. The Zacks Consensus Estimate for 2020 bottom line has been revised to earnings of 1 cent from a loss of 8 cents in the past 60 days. The company has a Growth Score of A. Also, the estimates for current-year sales suggest growth of 46.2% year over year.
Nashville, TN-based Cumberland Pharmaceuticals Inc. (CPIX - Free Report) is a specialty pharmaceutical company, involved in commercialization and development of prescription products for hospital acute care, oncology, and gastroenterology markets globally. The Zacks Consensus Estimate for 2020 earnings has moved north by 10% to 11 cents in the past 60 days. The company has a Growth Score of B. It has a trailing four-quarter positive earnings surprise of 237.99%, on average.
Get the rest of the 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.
Image: Bigstock
4 Top-Ranked Liquid Bets to Build a Successful Portfolio
A company with strong liquidity always has the potential to provide higher returns as stable financial resources help fuel business growth. It indicates a company’s capability of meeting debt obligations by converting its assets into liquid cash and equivalents.
However, one should be careful of investing in a stock with high liquidity level as it may also indicate that the company is failing to utilize its assets efficiently.
Therefore, in addition to the sufficient cash in hand, an investor may also consider a company’s capital deployment abilities before putting his money on its stock. A healthy company with favorable liquidity may prove to be a profitable pick for 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.
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 four of the 12 stocks that qualified the screen:
Based in Luxembourg, MagnaChip Semiconductor Corp. (MX - Free Report) designs, manufactures and sells analog and mixed-signal semiconductor platform solutions for communications, Internet of Things, consumer, industrial and automotive applications. The Zacks Consensus Estimate for 2020 earnings has moved north by 4.7% to 89 cents in the past 60 days. The company has a Growth Score of A. It has a trailing four-quarter positive earnings surprise of 82.59%, on average.
Headquartered in New York, NY, PJT Partners Inc. (PJT - Free Report) is a global advisory-focused investment bank. The Zacks Consensus Estimate for 2020 earnings per share moved up 3.8% to $3.04 over the past 30 days. The company has a Growth Score of A. Further, the consensus mark for current-year sales indicate an improvement of 15.4% year over year.
Domiciled in Bellingham, WA, eXp World Holdings Inc. (EXPI - Free Report) is the holding company for eXp Realty and VirBELA. The company provides cloud-based real estate brokerage services primarily in the United States and Canada. The Zacks Consensus Estimate for 2020 bottom line has been revised to earnings of 1 cent from a loss of 8 cents in the past 60 days. The company has a Growth Score of A. Also, the estimates for current-year sales suggest growth of 46.2% year over year.
Nashville, TN-based Cumberland Pharmaceuticals Inc. (CPIX - Free Report) is a specialty pharmaceutical company, involved in commercialization and development of prescription products for hospital acute care, oncology, and gastroenterology markets globally. The Zacks Consensus Estimate for 2020 earnings has moved north by 10% to 11 cents in the past 60 days. The company has a Growth Score of B. It has a trailing four-quarter positive earnings surprise of 237.99%, on average.
Get the rest of the 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.