Zacks.com Featured Highlights Include: Vector, Kirkland Lake Gold, Och-Ziff Capital Management And Aerojet Rocketdyne
Zacks Investment Research | Aug 28, 2019 10:34PM ET
For Immediate Release
Chicago, IL – August 29, 2019 - Stocks in this week’s article are Vector Group Ltd. (NYSE:VGR) , Kirkland Lake Gold Ltd. (TSX:KL) , Och-Ziff Capital Management Group Inc. (NYSE:OZM) and Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) .
Bet on These 4 Top-Ranked Liquid Stocks for Exciting Returns
Investors seeking strong returns may allocate their assets to stocks with significant 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 generate higher returns as liquidity drives growth. However, one should be prudent 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 it is failing to use its assets efficiently.
Hence, the efficiency level of a company should be considered in addition to its liquidity to identify potential winners as this combination indicates underlying financial strength.
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:Zacks Investment Research
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