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Add These 4 Top-Ranked Liquid Stocks for Healthy Gains
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Building a portfolio with favorable liquidity stocks will likely work in favor of investors seeking healthy returns.
Liquidity measures 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.
One needs to exercise caution before investing in such stocks. High liquidity may indicate that the company is clearing its dues faster than its peers. However, this may also suggest that the company cannot utilize its assets competently.
Hence, an investor may consider a company’s efficiency level in addition to its 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 — also known as 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 suggest 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 — also called the ‘acid-test ratio’ or ‘quick assets ratio’ — indicates a company’s ability to pay short-term obligations. It considers inventory, excluding the current assets relative to current liabilities. Like the current ratio, a quick ratio of more than 1 is desirable.
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 current 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. 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 greater than 1 are desirable, significantly high ratios may indicate inefficiency.)
Asset utilization greater 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, when combined with a Zacks Rank #1 or 2, handily beat other stocks.)
These criteria have narrowed the universe of more than 7,700 stocks to only six.
Here are four of the six stocks that qualified for the screen:
Li Auto (LI - Free Report) , is an innovator in energy vehicle market based in Beijing, China. The company designs, develops, manufactures and sells premium smart electric SUVs. The Zacks Consensus Estimate for LI’s 2023 earnings has been revised upward to earnings of 25 cents per share from a loss of 8 cents in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 86.8%, on average.
Oceaneering International (OII - Free Report) is a leading provider of integrated technology solutions and is active at all the phases of the offshore oilfield lifecycle. Oceaneering’s geographically diversified asset base spread across the United States and rest of the world and its revenue — evenly split between international and domestic operations — lowers its risk profile. The outlook for the company’s ‘Subsea Robotics’ unit is particularly impressive. Besides, Oceaneering's strong relationships with high-quality customers provide revenue visibility and business certainty. The Zacks Consensus Estimate for 2023 earnings is pegged at 96 cents per share, up 4.3% in the past 60 days. OII has a Growth Score of B.
Tingo Group through its wholly-owned subsidiary, Tingo Mobile, is the Agri-Fintech company operating principally in Africa, with a marketplace platform that empowers social upliftment through mobile, technology and financial access for rural farming communities. The Zacks Consensus Estimate for Tingo Group’s 2023 earnings has been revised upward to $1.83 per share from $1.76 in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 17.9%, on average.
eGain Corporation (EGAN - Free Report) provides customer engagement solutions. It offers web customer interaction applications, social customer interaction applications and contact center applications. The company provides consulting, implementation and training services and maintenance and support services. The Zacks Consensus Estimate for fiscal 2024 earnings is pegged at 29 cents per share, unchanged in the past 30 days. EGAN has a Growth Score of A and a trailing four-quarter earnings surprise of 241.7%, 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 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/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 mentioned in this material.
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Add These 4 Top-Ranked Liquid Stocks for Healthy Gains
Building a portfolio with favorable liquidity stocks will likely work in favor of investors seeking healthy returns.
Liquidity measures 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.
One needs to exercise caution before investing in such stocks. High liquidity may indicate that the company is clearing its dues faster than its peers. However, this may also suggest that the company cannot utilize its assets competently.
Hence, an investor may consider a company’s efficiency level in addition to its 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 — also known as 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 suggest 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 — also called the ‘acid-test ratio’ or ‘quick assets ratio’ — indicates a company’s ability to pay short-term obligations. It considers inventory, excluding the current assets relative to current liabilities. Like the current ratio, a quick ratio of more than 1 is desirable.
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 current 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.
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 greater than 1 are desirable, significantly high ratios may indicate inefficiency.)
Asset utilization greater 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, when combined with a Zacks Rank #1 or 2, handily beat other stocks.)
These criteria have narrowed the universe of more than 7,700 stocks to only six.
Here are four of the six stocks that qualified for the screen:
Li Auto (LI - Free Report) , is an innovator in energy vehicle market based in Beijing, China. The company designs, develops, manufactures and sells premium smart electric SUVs. The Zacks Consensus Estimate for LI’s 2023 earnings has been revised upward to earnings of 25 cents per share from a loss of 8 cents in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 86.8%, on average.
Oceaneering International (OII - Free Report) is a leading provider of integrated technology solutions and is active at all the phases of the offshore oilfield lifecycle. Oceaneering’s geographically diversified asset base spread across the United States and rest of the world and its revenue — evenly split between international and domestic operations — lowers its risk profile. The outlook for the company’s ‘Subsea Robotics’ unit is particularly impressive. Besides, Oceaneering's strong relationships with high-quality customers provide revenue visibility and business certainty. The Zacks Consensus Estimate for 2023 earnings is pegged at 96 cents per share, up 4.3% in the past 60 days. OII has a Growth Score of B.
Tingo Group through its wholly-owned subsidiary, Tingo Mobile, is the Agri-Fintech company operating principally in Africa, with a marketplace platform that empowers social upliftment through mobile, technology and financial access for rural farming communities. The Zacks Consensus Estimate for Tingo Group’s 2023 earnings has been revised upward to $1.83 per share from $1.76 in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 17.9%, on average.
eGain Corporation (EGAN - Free Report) provides customer engagement solutions. It offers web customer interaction applications, social customer interaction applications and contact center applications. The company provides consulting, implementation and training services and maintenance and support services. The Zacks Consensus Estimate for fiscal 2024 earnings is pegged at 29 cents per share, unchanged in the past 30 days. EGAN has a Growth Score of A and a trailing four-quarter earnings surprise of 241.7%, 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 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 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 mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.