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, or have a cushion for future lulls in demand, and most importantly, it keeps a company's doors open. We ran a screen for stocks with strong cash reserves, narrowing down for those that also look undervalued by their fundamentals. We also made sure that the companies pay nice sustainable dividends. Are these the types of stocks that you're looking for?
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 Price/Book Value Ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a Price/Book Value Ratio of less than 1 it is stated to be trading below "break up" value. A lower P/BV Ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.
The Price/Sales ratio is a price-multiple valuation metric used to help identify if a firm is cheap by its twelve month trailing sales numbers. In the most basic terms it let's an investor know how much the investment community is willing to pay for every dollars worth of sales. A firm with a P/S ratio of one or lower would be viewed as cheap because investors are paying $1 or less for every dollars worth of a firm's sales. On the other hand, a firm is generally considered to be expensive when the P/S ratio is above three. These are general guidelines used by the investment community not hard rules to be clear. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share
We first looked for dividend stocks. From here, we then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2). From here, we then looked for companies that are undervalued (P/BV<1)(P/S<1). We did not screen out any market caps or sectors.
Do you think these stocks should be priced higher? Use our list along with your own analysis.
1) Universal Corp. (UVV)
|Industry:||Tobacco Products, Other|
Universal Corp. has a Dividend Yield of 4.37% and Payout Ratio of 58.40% and Current Ratio of 4.31 and Quick Ratio of 2.43 and Price/Book Value Ratio of 0.88 and Price/Sales Ratio of 0.43. The short interest was 12.71% as of 05/30/2012. Universal Corporation, through its subsidiaries, operates as a leaf tobacco merchant and processor primarily in North America, South America, Africa, Europe, and Asia. It engages in selecting, buying, processing, packing, storing, supplying, shipping, and financing leaf tobacco for sale to, or for the account of, manufacturers of consumer tobacco products. The company processes and/or sells flue-cured and burley tobaccos, dark air-cured tobaccos, and oriental tobaccos. Its flue-cured, burley, and oriental tobaccos are used principally in the manufacture of cigarettes; and dark air-cured tobaccos are used in the manufacture of cigars, pipe tobacco, and smokeless tobacco products.
2) Superior Industries International, Inc. (SUP)
Superior Industries International, Inc. has a Dividend Yield of 3.84% and Payout Ratio of 26.41% and Current Ratio of 5.71 and Quick Ratio of 4.76 and Price/Book Value Ratio of 0.97 and Price/Sales Ratio of 0.54. The short interest was 3.83% as of 05/30/2012. Superior Industries International, Inc. engages in the design, manufacture, and sale of aluminum road wheels to original equipment manufacturers primarily in North America. It supplies cast aluminum wheels to automobile and light truck manufacturers. The company was founded in 1957 and is headquartered in Van Nuys, California.
3) Hooker Furniture Corp. (HOFT)
|Industry:||Home Furnishings & Fixtures|
Hooker Furniture Corp. has a Dividend Yield of 3.62% and Payout Ratio of 85.54% and Current Ratio of 6.99 and Quick Ratio of 4.70 and Price/Book Value Ratio of 0.94 and Price/Sales Ratio of 0.54. The short interest was 1.26% as of 05/30/2012. Hooker Furniture Corporation, together with its subsidiaries, designs, develops, imports, and markets residential wood, metal, and upholstered furniture products in North America. The company offers wood furniture products, including home entertainment, home office, accent, dining, bedroom, and bath furniture in the upper-medium price points sold under the Hooker Furniture brand, and sold at moderate price points under the Envision Lifestyle Collections by Hooker Furniture brand. It also provides youth bedroom furniture under the Opus Designs by Hooker brand; and motion and stationary leather furniture. In addition, the company offers various residential leather and fabric upholstered furniture under the Bradington-Young and Seven Seas upholstery brand; specializes in leather reclining and motion chairs, sofas, club chairs, and executive desk chairs; and offers upscale occasional chairs and other seating under the Sam Moore upholstery brand.
4) CSS Industries Inc. (CSS)
|Industry:||Specialty Retail, Other|
CSS Industries Inc. has a Dividend Yield of 3.18% and Payout Ratio of 35.99% and Current Ratio of 5.21 and Quick Ratio of 3.36 and Price/Book Value Ratio of 0.75 and Price/Sales Ratio of 0.48. The short interest was 2.36% as of 05/30/2012. CSS Industries, Inc., a consumer products company, engages in the design, manufacture, procurement, distribution, and sale of seasonal and occasion social expression products principally in the United States and Canada. Its seasonal and occasion products include decorative ribbons and bows, boxed greeting cards, gift tags, gift wrap, gift bags, gift boxes, gift card holders, decorative tissue paper, decorations, classroom exchange Valentines, decorative ribbons and bows, floral accessories, Halloween masks, costumes, make-up and novelties, Easter egg dyes and novelties, craft and educational products, stickers, memory books, stationery, journals, notecards, infant and wedding photo albums, scrapbooks, and other gift items that commemorate life's celebrations, as well as teachers' aids and other learning oriented products.
*Company profiles were sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.