Current ratio is a popular way for investors to assess the health of a stock’s balance sheet. Current ratio is a measure of a company’s ability to pay its current liabilities and obligations due within one year.
Mathematically, current ratio is a company’s current assets divided by its current liabilities. In practical terms, it’s a quick way for investors to gauge a company’s liquidity.
Why Is It Important?
Investors can compare a stock’s current ratio to other companies within its industry. Stocks with a higher current ratio will have an easier time paying near-term liabilities.
A company with a current ratio well below its industry average may have a higher risk of default in the near-term and require some additional digging into the balance sheet.
However, if a company has a current ratio that is too high, it could be a sign that the company is not utilizing its assets as efficiently as it could be.
High Current Ratio Stocks
Here are 15 stocks with relatively heavy volume (over 500,000 shares daily) and a high current ratio (over 3), according to Finviz:
- Pinterest Inc (NYSE: PINS), 13.7 ratio.
- Shopify Inc (NYSE: SHOP), 11.2 ratio.
- Twilio Inc (NYSE: TWLO), 9.6 ratio.
- Beyond Meat Inc (NASDAQ: BYND), 9.0 ratio.
- Twitter Inc (NYSE: TWTR), 8.7 ratio.
- NVIDIA Corporation (NASDAQ: NVDA), 8.6 ratio.
- Crispr Therapeutics AG (NASDAQ: CRSP), 8.3 ratio.
- Snap Inc (NYSE: SNAP), 7.3 ratio.
- Xilinx, Inc. (NASDAQ: XLNX), 6.4 ratio.
- Etsy Inc (NASDAQ: ETSY), 6.1 ratio.
- Skyworks Solutions Inc (NASDAQ: SWKS), 5.6 ratio.
- Facebook, Inc. (NASDAQ: FB), 4.7 ratio.
- Lumentum Holdings Inc (NASDAQ: LITE), 4.5 ratio.
- Tiffany & Co. (NYSE: TIF), 4.2 ratio.
- Indian Energy Exchange Ltd (NYSE: IEX), 3.2 ratio.
Current ratio can give a quick glimpse at the health of a company’s balance sheet, but its only one measure of a company’s health. To get a full picture of a business, smart investors incorporate all available information and dozens of financial metrics into their analysis of a stock.
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