3 Highly Liquid Takeover/LBO Targets With Impressive Profitability

Includes: CERN, DGIT, MAT
by: Kapitall

Analysts and investors follow potential takeover/leveraged buyout (LBO) targets because whenever a takeover is announced, the target's stock price usually jumps to reflect the takeover premium being paid. This is obviously a profitable event for shareholders.

Keeping this in mind, we compiled a list of rumored potential takeover/LBO targets from various sources including iStockAnalyst and CNN Money. We screened these stocks for those with high levels of company liquidity, with current ratios above 3. (Companies with healthy liquidity are viewed as more favorable takeover targets.)

We then screened these stocks for those with high profitability, measured by higher gross, operating, and pretax margins than their industry averages.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these companies are attractive takeover targets? Use this list as a starting point for your own analysis.

List sorted by current ratio.

1. Cerner Corporation (NASDAQ:CERN): Designs, develops, markets, installs, hosts, and supports healthcare information technology, healthcare devices, and content solutions for healthcare organizations and consumers worldwide. Takeover/LBO rumor sourced from Seeking Alpha. Current ratio at 3.77. TTM gross margin at 47.02% vs. industry average at 45.99%. TTM operating margin at 20.38% vs. industry average at 13.79%. TTM pretax margin at 20.8% vs. industry average at 11.6%.

2. Mattel Inc. (NASDAQ:MAT): Engages in the design, manufacture, and marketing of various toy products worldwide. Takeover/LBO rumor sourced from CNBC. Current ratio at 3.31. TTM gross margin at 51.97% vs. industry average at 44.72%. TTM operating margin at 16.73% vs. industry average at 12.13%. TTM pretax margin at 15.49% vs. industry average at 10.15%.

3. DG FastChannel, Inc. (NASDAQ:DGIT): Provides digital technology services that enable the electronic delivery of advertisements, syndicated programs, and video news releases to traditional broadcasters, online publishers, and other media outlets. Takeover/LBO rumor sourced from iStockAnalyst. Current ratio at 3.11. TTM gross margin at 66.98% vs. industry average at 42.14%. TTM operating margin at 28.99% vs. industry average at 19.01%. TTM pretax margin at 19.95% vs. industry average at 15.24%.

*Profitability data sourced from Fidelity, all other data sourced from Finviz. To access the complete list of takeover targets, click here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.