Yahoo Finance 4 Top-Ranked Liquid Stocks to Bet on for Alluring 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.
However, 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 nine.
Here are four stocks out of the nine that qualified for the screen:
Abercrombie & Fitch Co ANF operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids through its store network across North America, Europe, Asia and the Middle East and a few e-commerce sites. Continued momentum across Abercrombie and Hollister brands bolstered sales in fourth-quarter fiscal 2023. The company is witnessing strong sales growth for each of its brands. Abercrombie witnessed favorable margin trends mainly driven by reduced freight costs and improved average unit retail. For the first quarter of fiscal 2024, net sales are projected to be up low double-digits from $836 million reported in the year-ago period. However, Abercrombie has been witnessing elevated operating costs on higher technology expenses and incentive-based compensation. The Zacks Consensus Estimate for fiscal 2024 earnings is pegged at $7.48 per share, up 14.9% in the past 60 days. ANF has a Growth Score of A and a trailing four-quarter earnings surprise of 715.6%, on average.
Semrush Holdings, Inc. SEMR operates an online visibility management SaaS platform. It provides valuable insights and solutions for global companies to create, manage and measure campaigns across numerous marketing platforms. It aids business organizations in executing pay-per-click, content, search engine optimization, social media and research campaigns.The Zacks Consensus Estimate for its 2024 earnings is pegged at 25 cents per share, moving north by 78.6% in the past 60 days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 154.2%, on average.
Crexendo, Inc CXDO provides cloud communication platforms and services, as well as video collaboration and managed IT services. These services are designed to offer enterprise-class cloud solutions to all businesses through their business partners, agents and direct channels. The Zacks Consensus Estimate for its 2024 earnings is pegged at 23 cents per share, moving north by 35.3% in the past 60 days. CXDO has a Growth Score of A and a trailing four-quarter earnings surprise of 204.2%, on average.
QuickLogic Corporation QUIK develops embedded FPGA (eFPGA) IP, discrete FPGAs and FPGA SoCs for use in several applications across edge and endpoint AI, consumer, computing, industrial, aerospace and defense verticals. QUIK is gaining from the increasing demand for its IP-related products. The Zacks Consensus Estimate for its 2024 earnings is pegged at 36 cents per share, unchanged in the past 60 days. The company has a Growth Score of A.
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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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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
QuickLogic Corporation (QUIK) : Free Stock Analysis Report
Crexendo Inc. (CXDO) : Free Stock Analysis Report
SEMrush Holdings, Inc. (SEMR) : Free Stock Analysis Report
