5 best performing liquid stocks to enrich your portfolio in 2021
A business with favorable liquidity has the potential to provide higher returns, as the cash supports the growth efforts of the business.
Liquidity indicates the ability of a company to meet its short-term debts by converting assets into cash and cash equivalents.
However, one should be sufficiently careful before investing in such stocks. While a high level of liquidity may suggest that the company is paying its contributions at a faster rate than its peers, it may also imply that it is not using its assets competently.
Therefore, it is prudent to consider a company’s level of efficiency as well as liquidity to identify potential winners.
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 indicate that the company has not used its assets in a meaningful way. 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 the inventory excluding short-term assets versus short-term 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 takes into account cash and cash equivalents as well as funds invested versus current liabilities. It measures a company’s ability to honor its 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 11
Here are five of the 11 actions that qualified the screen:
Based in New Albany, OH, Abercrombie & Fitch ANF is a specialist retailer of high-end casual clothing for men, women and children. The company operates through a network of approximately 850 stores in North America, Asia, Europe and the Middle East. Zacks’ consensus estimate for FY2021 earnings is set at $ 4.40 per share, up 33.3% in the past 60 days. The company has a growth score of A and a surprise four-quarter earnings of 510.9%, on average.
Based in St. Louis, MO Resources of the Ark ARCH is one of the largest coal producers in the United States, operating nine mines in major coalfields across the country. The location of its mines and access to export facilities allow the company to ship coal around the world. During the fiscal year ended December 31, 2020, it sold nearly 63 million tonnes of coal, of which 0.9 million tonnes were purchased from third parties. Zacks’ consensus estimate for 2021 earnings is set at $ 13.15 per share, up 145.8% in the past 60 days. The company has a growth score of B and a surprise four-quarter profit of 5.4%, on average.
Based in Norwalk, Connecticut, Terex Company TEX is a global manufacturer of aerial work platforms, materials processing machines and cranes. It designs, manufactures and supports products used in construction, maintenance, manufacturing, energy, minerals and materials management applications. The company’s manufacturing facilities are located in the United States, Canada, Europe, Australia, Asia and South America. Zacks’ consensus estimate for 2021 earnings is set at $ 3.00 per share, up 17.2% in the past 60 days. The company has a growth score of A and a surprise four-quarter profit of 307.3%, on average.
Based in Dublin, California TriNet Group TNET offers a wide range of human resources solutions mainly for small and medium enterprises (SMEs). She provides expertise in human capital, risk mitigation and compliance, payroll and real-time technology to SMEs in various verticals such as architecture and engineering, consulting, life sciences, marketing and advertising. , technology, retail and wholesale, among others. Zacks’ consensus estimate for 2021 earnings is set at $ 4.66 per share, up 21% in the past 60 days. The company has a growth score of B and a surprise profit for the last four quarters of 96.8%, on average.
Based in Santa Barbara, California, His bone SONO is a consumer electronics company. It is mainly involved in manufacturing smart speakers with immersive sound experience. The company is leveraging changing consumer technologies and entertainment trends to address customer audio consumption models that are largely characterized by the rapid adoption of voice assistants and streaming services. Zacks’ consensus estimate for FY2021 earnings is set at $ 1.11 per share, up 30.6% in the past 60 days. The company has a growth score of A and a surprise profit for the last four quarters of 297.3%, 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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Abercrombie & Fitch Company (ANF): Free Stock Analysis Report
Terex Corporation (TEX): Free Stock Analysis Report
Sonos, Inc. (SONO): Free Stock Analysis Report
TriNet Group, Inc. (TNET): Free Stock Analysis Report
Arch Resources Inc. (ARCH): Free Stock Analysis Report
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