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5 Top-Performing Liquid Stocks for Attractive Returns in 2021
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Investors seeking healthy returns will benefit from adding stocks with favorable liquidity in their investment portfolio.
Liquidity is a measure of a company’s capability 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 provide attractive returns.
Nevertheless, one should be cautious enough before investing in such stocks. While a high liquidity level may indicate that the company is clearing its dues at a faster rate compared with peers, it may also suggest that the company is not able to competently utilize its assets.
Hence, one may consider a company’s efficiency level in addition to its liquidity for identifying prospective 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. 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 — 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.
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 five of the 12 stocks that qualified the screen:
Mountain View, CA-based Intuit (INTU - Free Report) is a business and financial software company that develops and sells financial, accounting and tax preparation software and related services for small businesses, consumers and accounting professionals, globally. The Zacks Consensus Estimate for fiscal 2021 earnings is pegged at $9.35 per share, up 12% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 49.7%, on average.
Headquartered in Duluth, GA, National Vision Holdings (EYE - Free Report) is one of the well-known and rapidly growing optical retailers in the United States. The company holds a strong position in the attractive value segment of the U.S. optical retail industry. National Vision provides budget-friendly eye exams, eyeglasses and contact lenses to low-income consumers and aims at making eye care and eyewear reasonable for all Americans. The Zacks Consensus Estimate for its 2021 earnings is pegged at $1.09 per share, up 21.1% in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 106.8%, on average.
Based in Omaha, NE, Lindsay Corporation (LNN - Free Report) provides a variety of proprietary water management, and road infrastructure products and services. The company sells its irrigation products primarily to a world-wide independent dealer network, who resell to their customers, the farmers. The company’s primary production facilities are located in the United States. The Zacks Consensus Estimate for its fiscal 2021 earnings is pegged at $3.77 per share, up 5% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 11.9%, on average.
Headquartered in Houston, TX, Magnolia Oil & Gas (MGY - Free Report) is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. The company is focused on the Eagle Ford Shale and Austin Chalk formations in South Texas. The Zacks Consensus Estimate for its 2021 earnings is pegged at $1.40 per share, up 5.3% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 22.9%, on average.
Kearney, NE-based Buckle (BKE - Free Report) is a well-known retailer that sells a wide array of brand names and private label casual apparel, including tops, denims and other casual bottoms, sportswear, outerwear, accessories and footwear. Buckle emphasizes personalized attention to its clients and offers individual customer services such as free alterations, layaways and a loyalty program. The Zacks Consensus Estimate for its fiscal 2021 earnings is pegged at $3.75 per share, up 25% in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 49.2%, on average.
Get the remaining 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.
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5 Top-Performing Liquid Stocks for Attractive Returns in 2021
Investors seeking healthy returns will benefit from adding stocks with favorable liquidity in their investment portfolio.
Liquidity is a measure of a company’s capability 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 provide attractive returns.
Nevertheless, one should be cautious enough before investing in such stocks. While a high liquidity level may indicate that the company is clearing its dues at a faster rate compared with peers, it may also suggest that the company is not able to competently utilize its assets.
Hence, one may consider a company’s efficiency level in addition to its liquidity for identifying prospective 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. 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 — 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.
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 five of the 12 stocks that qualified the screen:
Mountain View, CA-based Intuit (INTU - Free Report) is a business and financial software company that develops and sells financial, accounting and tax preparation software and related services for small businesses, consumers and accounting professionals, globally. The Zacks Consensus Estimate for fiscal 2021 earnings is pegged at $9.35 per share, up 12% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 49.7%, on average.
Headquartered in Duluth, GA, National Vision Holdings (EYE - Free Report) is one of the well-known and rapidly growing optical retailers in the United States. The company holds a strong position in the attractive value segment of the U.S. optical retail industry. National Vision provides budget-friendly eye exams, eyeglasses and contact lenses to low-income consumers and aims at making eye care and eyewear reasonable for all Americans. The Zacks Consensus Estimate for its 2021 earnings is pegged at $1.09 per share, up 21.1% in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 106.8%, on average.
Based in Omaha, NE, Lindsay Corporation (LNN - Free Report) provides a variety of proprietary water management, and road infrastructure products and services. The company sells its irrigation products primarily to a world-wide independent dealer network, who resell to their customers, the farmers. The company’s primary production facilities are located in the United States. The Zacks Consensus Estimate for its fiscal 2021 earnings is pegged at $3.77 per share, up 5% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 11.9%, on average.
Headquartered in Houston, TX, Magnolia Oil & Gas (MGY - Free Report) is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. The company is focused on the Eagle Ford Shale and Austin Chalk formations in South Texas. The Zacks Consensus Estimate for its 2021 earnings is pegged at $1.40 per share, up 5.3% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 22.9%, on average.
Kearney, NE-based Buckle (BKE - Free Report) is a well-known retailer that sells a wide array of brand names and private label casual apparel, including tops, denims and other casual bottoms, sportswear, outerwear, accessories and footwear. Buckle emphasizes personalized attention to its clients and offers individual customer services such as free alterations, layaways and a loyalty program. The Zacks Consensus Estimate for its fiscal 2021 earnings is pegged at $3.75 per share, up 25% in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 49.2%, on average.
Get the remaining 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.