Interested in following smaller companies? Interested in services companies that pay dividends? Interested in companies with high liquidity? Interested in companies with minimal debt, especially long-term debt? If so, here are some interesting ideas for you.
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. Now 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 small cap services dividend stocks. We then looked for businesses 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<.3). From here, we then looked for companies that operate with little to no long term debt (Long Term D/E Ratio<.3).
Do you think these small-cap stocks are undervalued and should be trading higher? Please use our list to assist with your own analysis.
1) American Science & Engineering Inc. (ASEI)
|Industry:||Security & Protection Services|
American Science & Engineering Inc. has a Dividend Yield of 4.10% and Payout Ratio of 67.12% and Current Ratio of 5.07 and Quick Ratio of 4.25 and Debt/Equity Ratio of 0.02 and Long Term Debt/Equity Ratio of 0.02. The short interest was 4.22% as of 05/20/2012. American Science and Engineering, Inc., together with its subsidiaries, develops, manufactures, markets, and sells X-ray inspection and other detection products for detection and security screening solutions in the United States and internationally. It offers cargo inspection systems comprising non-intrusive inspection products, which are primarily used for the screening of trucks, cars, cargo containers, pallets, and air cargo at border crossings, seaports, military bases, airports, and cargo and transportation hubs. The cargo inspection systems include OmniView gantry system, a cargo and vehicle inspection system; Z Portal system, a drive-through inspection system for scanning cargo and vehicles; Z Gantry system, a Z Backscatter inspection system for scanning cars, vans, trucks, and their cargo; Sentry Portal system, a drive through transmission X-ray inspection system; and MobileSearch High-Energy, a mobile inspection system for scanning trucks, cargo containers, and vehicles.
2) World Wrestling Entertainment Inc. (WWE)
|Industry:||Entertainment - Diversified|
World Wrestling Entertainment Inc. has a Dividend Yield of 5.83% and Payout Ratio of 113.19% and Current Ratio of 3.30 and Quick Ratio of 3.28 and Debt/Equity Ratio of 0.00 and Long Term Debt/Equity Ratio of 0.00. The short interest was 12.38% as of 05/20/2012. World Wrestling Entertainment, Inc., an integrated media and entertainment company, engages in the sports entertainment business. The company develops content centered around its talent, and presents at its live and televised events featuring World Wrestling Entertainment. It operates through four segments: Live and Televised Entertainment, Consumer Products, Digital Media, and WWE Studios.
3) Healthcare Services Group Inc. (HCSG)
Healthcare Services Group Inc. has a Dividend Yield of 3.34% and Payout Ratio of 109.51% and Current Ratio of 5.04 and Quick Ratio of 4.48 and Debt/Equity Ratio of 0.00 and Long Term Debt/Equity Ratio of 0.00. The short interest was 7.27% as of 05/20/2012. Healthcare Services Group, Inc., together with its subsidiaries, provides housekeeping, laundry, linen, facility maintenance, and dietary services to nursing homes, retirement complexes, rehabilitation centers, and hospitals in the United States. It operates in two segments, Housekeeping and Dietary. The Housekeeping segment offers cleaning, disinfecting and sanitizing of patient rooms and common areas of client's facility, as well as laundering and processing the personal clothing belonging to the facility's patients.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.