Life Technologies Corporation (LIFE) is one of the most traded stocks, with an average volume of over 2.1 million shares traded daily. Should internet investors concentrate on this stock because it is popular?
No. As simple as it sounds, you are better off screening for more attractive stocks than focusing on stocks with the highest trading volumes. Instead of popularity, LIFE's earnings and future cash flows will determine its value. The future financial potential of a stock can be gauged by using financial metrics to determine how cheaply a stock is priced, its ability to weather hardship, and its growth potential.
As alternatives to LIFE, consider the following stocks with strong track-records and solid credit scores:
Ticker | Company | Industry | 10-Year Average ROE | Altman Z-score |
Alpha & Omega Semiconductor | Semiconductor - Specialized | 9.8% | 3.86 | |
Amtech Systems Inc. | Semiconductor Equipment & Materials | 2.3% | 3.17 | |
EnerSys | Industrial Electrical Equipment | 4.9% | 3.40 | |
LB Foster Co. | Basic Materials Wholesale | 9.6% | 5.15 | |
G-III Apparel Group, Ltd. | Textile - Apparel Clothing | 8.1% | 3.50 | |
ICF International Inc. | Management Services | 8.2% | 3.94 | |
LIFE | Life Technologies Corp | Medical Laboratories & Research | 1.9% | 2.00 |
Unlike LIFE, these alternative stocks are all categorized as "safe" according to the Altman Z-score,* indicating that they are not considered bankruptcy risks. Moreover, the average 10-year return on equity demonstrates that these six stocks have grown shareholder wealth over the long term. It is clear from these two metrics that each of these six alternative stocks is a "quality" stock capable of weathering bad times and delivering positive long-term results.
What's more, these stocks are cheaper and have higher growth prospects:
Ticker | P/E | P/S | P/B | EPS growth past 5 years | EPS growth next 5 years |
AOSL | 11.46 | 0.75 | 0.99 | 67.5% | 20.0% |
ASYS | 3.85 | 0.35 | 0.73 | 45.9% | 35.0% |
ENS | 13.41 | 0.74 | 1.72 | 28.1% | 13.0% |
FSTR | 15.03 | 0.56 | 1.13 | 33.8% | 10.0% |
GIII | 9.2 | 0.42 | 1.45 | 37.8% | 17.5% |
ICFI | 16.19 | 0.65 | 1.39 | 46.2% | 14.2% |
LIFE | 22.34 | 2.35 | 1.92 | 25.3% | 10.0% |
Based on lower price-to-earnings ratios, price-to-sales ratios, and price-to-book ratios, these stocks are cheaper than LIFE at current market prices. Better yet, they have better growth prospects according to analyst projections and past growth trends. Rather than restrict yourself to concentrated investments in one popular stock like LIFE, consider a diversified mix of these six securities as a more attractive alternative.
*Please read the article disclaimer.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
