For Immediate Release
Chicago, IL – March 25, 2019– Stocks in this week’s article include Commvault Systems, Inc. CVLT, Fortinet Inc. FTNT, Medifast MED and Evercore Inc. EVR. Kevin Matras screens for companies showing their 'first' profit and explains why they are ones to watch.
Screen of the Week written by Kevin Matras of Zacks Investment Research:
Grab These 4 Liquid Picks on the Top Rung for Robust Returns
Investors seeking strong returns may allocate to assets in stocks with strong liquidity. Liquidity is an important yardstick that indicates a company’s capability to meet debt obligations by converting assets into cash.
A company with a favorable liquidity position has the potential to provide higher returns as liquidity drives growth. However, one should exercise prudence before investing in such stocks. While a high liquidity level may imply that the company is meeting its obligations at a faster rate than its peers, it may also indicate that the company is failing to use its assets efficiently.
Hence, one may consider the efficiency level of a company in addition to its liquidity to identify prospective winners.
Measures to Identify Liquid Stocks
Current Ratio: It measures current assets relative to current liabilities. This ratio is used for measuring a company’s potential to meet both short- and long-term debt obligations. Thus, a current ratio — also known as working capital ratio — below 1 indicates that the company has more liabilities than assets. However, a high current ratio does not always indicate that the company is in good financial shape. It may also mean that the company has failed to utilize its assets significantly. Hence, a range of 1 to 3 is considered ideal.
Quick Ratio: Unlike current ratio, quick ratio — also called “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. Like the current ratio, a quick ratio of greater than 1 is desirable.
Cash Ratio: This is the most conservative ratio among the three, as it takes into account only cash and cash equivalents, and invested funds relative to current liabilities. It measures a company’s ability to meet its current debt obligations using the most liquid of assets. Though a cash ratio of more than 1 may point to sound financials, a higher number may indicate inefficiency in cash utilization.
So, a ratio greater than 1 is desirable at all times but may not always appropriately represent a company’s financial condition.
For the rest of this Screen of the Week article please visit Zacks.com at:https://www.zacks.com/stock/news/363050/grab-these-4-liquid-picks-on-the-top-rung-for-robust-returns
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Fortinet, Inc. (FTNT) : Free Stock Analysis Report
CommVault Systems, Inc. (CVLT) : Free Stock Analysis Report
Evercore Inc (EVR) : Free Stock Analysis Report
MEDIFAST INC (MED) : Free Stock Analysis Report
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