5 best performing liquid stocks to grab for higher returns – August 6, 2021
Investors looking for healthy returns can benefit by adding stocks with favorable liquidity levels to their portfolio. Liquidity levels are a good indicator of the financial health of a business.
Liquidity measures the company’s ability to honor short-term debts by converting assets into cash and cash equivalents.
However, one should be careful before adding such stocks to their investment portfolio. While a high level of liquidity may indicate that the business is paying its dues at a faster rate than its peers, it may also suggest that the business is not using resources competently.
Therefore, it is advisable to consider a company’s level of efficiency in addition to its liquidity to identify potential winners. An efficient business with a favorable level of liquidity can prove to be a lucrative addition to your portfolio.
Measures to identify liquid stocks
Current ratio: It measures current assets against current liabilities. This ratio is used to measure a company’s potential to honor short and long term debts. So a current ratio – also known as the working capital ratio – less than 1 indicates that the business has more liabilities than assets. However, a current high ratio does not always indicate that the company is in good financial health. It can also mean that the company has not used its assets to a significant extent. Therefore, a range of 1 to 3 is considered ideal.
Quick report: Unlike the current ratio, the Quick Ratio – also known as the “Acid Test Ratio” or “Quick Asset Ratio” – indicates a company’s ability to pay its obligations in the short term. It considers stocks excluding current assets in relation to current liabilities. Like the current ratio, a quick ratio greater than 1 is desirable.
Cash ratio: This is the most conservative of the three ratios, as it only takes into account cash and cash equivalents as well as funds invested versus current liabilities. It measures a company’s ability to honor current debts using the most liquid assets. While a cash ratio greater than 1 may indicate a healthy financial position, a higher number may indicate inefficiency in the use of cash.
Thus, a ratio greater than 1 is desirable at all times, but may not always adequately represent the financial condition of a business.
In order to pick the best of the bunch, we added asset usage – a widely used measure of a business’s efficiency – as one of the selection criteria. Asset utilization is the ratio of total sales in the last 12 months to the average of the last four quarters of total assets. Although this ratio varies from sector to sector, companies with a higher ratio than their respective sectors can be considered efficient.
In order to ensure that these liquid and efficient stocks have strong growth potential, we have added our exclusive 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.)
Use of assets above the industry average (Higher asset utilization than the industry average indicates a company’s efficiency.)
Zacks rank equal to # 1 (Only stocks with a strong buy rating can pass). You can see The full list of today’s Zacks # 1 Rank stocks here.
Growth score less than or equal to B (The back-tested results show that stocks with a Growth score of A or B when combined with a rank 1 or 2 of Zacks easily beat other stocks.)
These criteria reduced the universe from over 7,700 stocks to just 14
Here are five of the 14 actions that qualified the screen:
Based in Houston, Texas, Magnolia Oil and Gas (MGY – Free Report) is an independent upstream operator engaged in the exploration, development and production of natural gas, crude oil as well as natural gas liquids. The company is focused on the Eagle Ford Shale and Austin Chalk formations in South Texas. Zacks’ consensus estimate for 2021 earnings is set at $ 1.95 per share, up 45.5% in the past 60 days. The company has a growth score of B and a surprise profit for the last four quarters of 39.3% on average.
Based in Baltimore, Maryland, Medifast (MEDIUM – Free Report) is a leading manufacturer and marketer of clinically proven healthy lifestyle products and programs. The Company produces, distributes and sells weight loss, weight management and healthy lifestyle products through its direct online channels as well as franchised weight control centers. Zacks’ consensus estimate for its 2021 earnings is set at $ 13.74 per share, up 0.9% over the past 60 days. The company has a growth score of B and a surprise four-quarter earnings of 16%, on average.
Providence, based on IR Textron (SMS – Free Report) is a global, multi-industry company that manufactures aircraft, automotive engine components and industrial tools. It also offers solutions and services for aircraft, fastening systems as well as industrial products and components. Its products include commercial and military helicopters, light and mid-size business jets, plastic fuel tanks, automotive refinishing products, golf carts and utility vehicles, turf car equipment, industrial pumps and gears, fasteners and engineering solutions as well as other products. Zacks’ consensus estimate for 2021 earnings is set at $ 3.28 per share, up 6.8% in the past 60 days. The company has a growth score of A and a surprise profit for the last four quarters of 37.4% on average.
Based in Houston, Texas, ConocoPhillips (COP – Free Report) is primarily involved in the exploration and production of petroleum and natural gas. Considering proven reserves and production, the company is the world’s largest explorer and producer. The company has a strong presence in both conventional and unconventional games in 16 countries. Zacks’ consensus estimate for 2021 earnings is set at $ 4.81 per share, up 44% in the past 60 days. The company has a growth score of B and a surprise four-quarter profit of 8.3%, on average.
Based in Long Island City, NY, Steven madden (SHOOT – Free Report) is engaged in the design, supply and sale of fashionable brand and private label shoes for men, women and children, as well as private label fashion handbags and accessories through the world. Zacks’ consensus estimate for 2021 earnings is set at $ 2.08 per share, up 24.6% in the past 60 days. The company has a growth score of A and a surprise profit for the last four quarters of 56.2%, on average.
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Disclosure: Officers, directors and / or employees of Zacks Investment Research may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document. An affiliated investment advisory firm may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document.
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