Are you looking for midsized companies that still have room to grow? Company liquidity is an important consideration in any stock analysis. Liquidity gives a company the ability to make big acquisitions if it sees investment opportunities, a cushion for future lulls in demand and, most importantly, it keeps a company's doors open. Are these the types of stocks that you're looking for? In search of companies that can manage their debt well? Are you after companies that have manageable long-term debt? We ran a screen you might find helpful.
The Current Ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. This doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick Ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
The Long-Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
We first looked for mid-cap stocks. We then looked for companies that have a substantial amount of cash on hand (Current Ratio > 2)(Quick Ratio > 2). Next, we then screened for businesses that have maintained a sound capital structure (D/E Ratio < 0.3). Next, we then screened for businesses that operate with little to no long-term debt (Long-Term D/E Ratio < 0.3). We did not screen out any sectors.
Do you think these mid-cap stocks have strong fundamentals? Use our list to help with your own analysis.
1. Allied Nevada Gold (NYSEMKT:ANV)
Allied Nevada Gold has a Current Ratio of 10.62 and Quick Ratio of 7.24 and Debt/Equity Ratio of 0.09 and Long-Term Debt/Equity Ratio of 0.07. The short interest was 5.55% as of May 17, 2012. Allied Nevada Gold, together with its subsidiaries, engages in the evaluation, acquisition, exploration, and advancement of gold exploration and development projects. It principally operates the Hycroft Mine, an open pit heap leach gold and silver mine covering approximately 61,389 acres of mineral rights located in the west of Winnemucca, Nev. The company is also involved in the exploration and development of various exploration properties, including Hasbrouck, Mountain View, Three Hills, Wildcat, Maverick Springs, and Pony Creek/Elliot Dome projects.
3. Cobalt International Energy (NYSE:CIE)
|Industry:||Independent Oil & Gas|
Cobalt International Energy has a Current Ratio of 9.05 and Quick Ratio of 8.82 and Debt/Equity Ratio of 0.02 and Long-Term Debt/Equity Ratio of 0.00. The short interest was 1.18% as of May 17, 2012. Cobalt International Energy, a development stage company, operates as an independent oil-focused exploration and production company. It focuses on the deepwater of the U.S. Gulf of Mexico, and offshore Angola and Gabon in West Africa. The company has strategic relationships with Total E&P U.SA.
3. CareFusion Corp. (NYSE:CFN)
|Industry:||Medical Instruments & Supplies|
CareFusion has a Current Ratio of 3.62 and Quick Ratio of 3.12 and Debt/Equity Ratio of 0.27 and Long-Term Debt/Equity Ratio of 0.22. The short interest was 2.01% as of May 17, 2012. CareFusion, a medical technology company, provides various healthcare products and services in the United States and internationally. It operates in two segments, Critical Care Technologies, and Medical Technologies and Services. The Critical Care Technologies segment develops, manufactures, and markets equipment and related supplies for infusion, medication and supply dispensing, and respiratory care.
Company profiles were sourced from Finviz. Financial data was sourced from Google Finance and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.