3 Highly Liquid Takeover/LBO Targets With Strong Sales Trends

|
 |  Includes: ADBE, BIIB, CERN
by: Kapitall

When a company announces that it is being taken over or acquired, its stock price usually jumps to reflect the takeover premium being paid for the company. This is why analysts and investors closely follow potential takeover/leveraged buyout (LBO) target companies.

We ran a screen with this idea in mind, beginning with a list of rumored potential takeover/LBO targets from various sources including CNN Money and Minyanville. We then screened this universe for stocks with high liquidity, with current ratios above 3. Companies with high amounts of cash and other liquid assets are considered more attractive as takeover targets.

We then screened these names for those that also have strong sales trends, with growth in revenue outpacing growth in accounts receivable over the last year. Since accounts receivable is the portion of revenue not yet received, and there is no guarantee the money will ever be received, the smaller the portion of revenue made up of receivables the better.

We also screened for stocks with improving liquidity, with accounts receivable comprising a smaller portion of current assets over the last year.

Interactive Chart: Press Play to compare changes in market cap 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 stocks are attractive takeover targets? Use this list as a starting point for your own analysis.

List sorted by increase in revenue over the last year.

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. Market cap at $12.38B, most recent closing price at $72.95. Current ratio at 3.42. Takeover/LBO rumor sourced from Seeking Alpha. Revenue grew by 23.08% during the most recent quarter ($615.63M vs. $500.2M y/y). Accounts receivable grew by 18.1% during the same time period ($563.21M vs. $476.9M y/y). Receivables, as a percentage of current assets, decreased from 41.61% to 37.49% during the most recent quarter (comparing 13 weeks ending 2011-12-31 to 13 weeks ending 2011-01-01).

2. Biogen Idec Inc. (NASDAQ:BIIB): Develops, manufactures, and markets therapeutics in the areas of neurology, immunology, hemophilia, and oncology in the United States and internationally. Market cap at $30.87B, most recent closing price at $129.55. Current ratio at 3.26. Takeover/LBO rumor sourced from Minyanville. Revenue grew by 8.83% during the most recent quarter ($1,326.71M vs. $1,219.07M y/y). Accounts receivable grew by -1.04% during the same time period ($831.23M vs. $839.99M y/y). Receivables, as a percentage of current assets, decreased from 33.07% to 27.94% during the most recent quarter (comparing 3 months ending 2011-12-31 to 3 months ending 2010-12-31).

3. Adobe Systems Inc. (NASDAQ:ADBE): Operates as a diversified software company in the Americas, Europe, the Middle East, Africa, and Asia. Market cap at $16.44B, most recent closing price at $33.17. Current ratio at 3.14. Takeover/LBO rumor sourced from Seeking Alpha. Revenue grew by 1.7% during the most recent quarter ($1,045.22M vs. $1,027.71M y/y). Accounts receivable grew by -3.96% during the same time period ($512.21M vs. $533.35M y/y). Receivables, as a percentage of current assets, decreased from 15.92% to 14.61% during the most recent quarter (comparing 13 weeks ending 2012-03-02 to 13 weeks ending 2011-03-04).

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

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