Yahoo Finance 4 Top-Ranked Liquid Stocks to Bet on for Robust Returns
Identifying stocks that offer healthy returns may sometimes prove to be difficult for investors. In that case, one may consider liquidity levels, which are a good indicator of a company’s financial health.
Liquidity is a measure of a company’s capability to meet short-term debt obligations. Stocks with high liquidity levels have always been in demand owing to their potential to provide maximum returns.
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 utilize assets efficiently.
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. The ratio gauges a company’s potential to meet short- and long-term debt obligations. A current ratio — the working capital ratio — below 1 indicates that the company has more liabilities than assets. A high current ratio does not always suggest that the company is in good financial shape. It may also indicate 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 — the ‘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. A quick ratio of more than 1 is desirable, like the current ratio.
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 existing 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.
We added our proprietary Growth Style Score to the screen to ensure these liquid and efficient stocks have solid growth potential.
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 is more significant 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 handily beat other stocks when combined with a Zacks Rank #1 or 2.)
These criteria have narrowed the universe of more than 7,700 stocks to only 16.
Here are four stocks out of the 16 that qualified for the screen:
Alpha and Omega Semiconductor Limited AOSL specializes in designing, developing and supplying a broad range of power semiconductors worldwide, including Power MOSFET, HV Gate Drivers, SiC, IGBT, IPM, TVS, Power IC and Digital Power products. In the last reported quarter, AOSL reported revenues of $150.1 million, up 13.2 % year over year. The uptick was driven by its rich product portfolio and increasing Tier 1 customer base.
For the quarter ended in June, Alpha and Omega foresees revenues of nearly $160 million (+/- $10 million). The Zacks Consensus Estimate for fiscal 2024 earnings is pegged at earnings of 58 cents per share, suggesting an improvement of 38.1% in the past 60 days. AOSL has a Growth Score of B and a trailing four-quarter earnings surprise of 44.9%, on average.
Atlassian Corporation TEAM is a global leader and innovator in the enterprise collaboration and workflow software space. The company offers a suite of cloud-based software solutions, which help organizations, collaborate and manage their workforce, such that teams work better together.
Momentum in cloud business is driving Atlassian’s performance. In the last reported quarter, management noted that Atlassian Marketplace topped $4 billion in lifetime sales since its commencement in 2012. The addition of generative AI features to some of its collaboration software bodes well. The expansion of its product portfolio through acquisitions is expected to drive its top line further. The company recently announced the buyout of Optic, an application programming interface ("API") documentation and management-focused company.
The Zacks Consensus Estimate for its fiscal 2025 earnings is pegged at $3.27 per share, up 1.9% in the past 60 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 29.71%, on average.
Abercrombie & Fitch Co. ANF is a specialty retailer of premium, high-quality casual apparel for men, women and kids. It has a vast 759-store network across North America, Europe, Asia and the Middle East. It operates a few e-commerce sites, including www.abercrombie.com, www.abercrombiekids.com, www.hollisterco.com and www.gillyhicks.com.
ANF is gaining from continued momentum across its brands — Hollister and Abercrombie. In first-quarter fiscal 2024, net sales improved 12% year over year at Hollister and 31% at Abercrombie. It has also been focused on making strategic investments across stores, digital and technology to bolster itself long-term. Management anticipates fiscal 2024 net sales to increase 10% year over year from $4.3 billion. For second-quarter fiscal 2024, net sales are projected to be up in the mid-teens from the $935 million reported in the year-ago period.
However, Abercrombie has been witnessing elevated operating costs on higher technology expenses and incentive-based compensation. Also, inflationary pressures are a concern. The Zacks Consensus Estimate for its fiscal 2024 earnings is pegged at $9.25 per share, up 23.7% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 210.3%, on average.
Logitech International S.A. LOGI is the parent holding company of Logitech. The company is a global leader in peripherals for personal computers and other digital platforms. It develops and markets innovative products in PC navigation, Internet communications, digital music, home entertainment control, video security, interactive gaming and wireless devices.
Logitech’s strong fourth-quarter fiscal 2024 results have boosted investors’ confidence in its recovery from the post-pandemic downturn. The quarter marked the first year-over-year sales growth for Logitech after two and a half years of downturn post-pandemic-driven boom. Increasing hybrid work trends are likely to boost demand for its video collaboration, keyboards & combos and pointing device tools. Thriving cloud-based video conferencing services continue to be a key catalyst. The rising adoption of new mobile platforms in mature and emerging markets will fuel demand for its peripherals and accessories. However, softening IT spending amid the current macroeconomic uncertainties might hurt its near-term performance.
The Zacks Consensus Estimate for its fiscal 2025 earnings is pegged at $4.28 per share, up 5.2% in the past 60 days. LOGI has a Growth Score of B and a trailing four-quarter earnings surprise of 49.3%, on average.
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Disclosure: Officers, directors and 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 is available at: https://www.zacks.com/performance.
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Logitech International S.A. (LOGI) : Free Stock Analysis Report
Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Alpha and Omega Semiconductor Limited (AOSL) : Free Stock Analysis Report
Atlassian Corporation PLC (TEAM) : Free Stock Analysis Report
