Large cap stocks did not grow to their size by twiddling their thumbs. These companies had to scale their businesses by focusing on producing actual earnings. When a company can do that, and is successful enough to put cash in the bank, you know that company is doing it right. Today we focused on large caps that have put spending money in their pockets by commanding strong earnings over time. We think you'll find the list interesting.
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).
Return on Assets [ROA] illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
We first looked for large cap stocks. From here, we then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We then looked for companies that have strong profitability relative to their asset base (ROA [TTM]>10%)(Net Margin [TTM]>10%). We did not screen out any sectors.
Do you think these large-cap stocks are undervalued and should be trading higher? Use our list to help with your own analysis.
1) Allergan Inc. (AGN)
|Industry:||Drug Manufacturers - Other|
Allergan Inc. has a Current Ratio of 4.38, a Quick Ratio of 4.10, a Return on Assets of 11.84%, and a Net Margin of 18.22%. The short interest was 1.64% as of 06/08/2012. Allergan, Inc. operates as a multi-specialty healthcare company primarily in the United States, Europe, Latin America, and the Asia Pacific. The company discovers, develops, and commercializes specialty pharmaceutical, biologics, medical device, and over-the-counter products for the ophthalmic, neurological, medical aesthetics, medical dermatological, breast aesthetics, obesity intervention, urological, and other specialty markets worldwide. It operates in two segments, Specialty Pharmaceuticals and Medical Devices.
2) Becton, Dickinson and Company (BDX)
|Industry:||Medical Instruments & Supplies|
Becton, Dickinson and Company has a Current Ratio of 3.27, a Quick Ratio of 2.45, a Return on Assets of 11.08%, and a Net Margin of 15.02%. The short interest was 3.80% as of 06/08/2012. Becton, Dickinson and Company, a medical technology company, develops, manufactures, and sells medical devices, instrument systems, and reagents worldwide. The company's BD Medical segment produces medical devices that are used in various healthcare settings. This segment's products include needles, syringes, and intravenous catheters for medication delivery; prefilled IV flush syringes; syringes, pen needles, and other drugs to treat diabetes; prefillable drug delivery systems; anesthesia needles and trays; sharps disposal containers; and closed-system transfer devices.
3) ARM Holdings plc (ARMH)
|Industry:||Semiconductor - Specialized|
ARM Holdings plc has a Current Ratio of 2.87, a Quick Ratio of 2.86, a Return on Assets of 10.71%, and a Net Margin of 25.28%. The short interest was 1.72% as of 06/08/2012. ARM Holdings plc designs reduced instruction set computing (RISC) microprocessors, physical intellectual property, and related technology and software. Its products and services include 16/32-bit RISC microprocessors cores, data engines, graphics intellectual property, and on-chip fabric intellectual property; embedded software; physical intellectual property; development tools; and consulting, support, and maintenance services. The company licenses and sells its technology and products to electronics companies, which in turn manufacture, market, and sell microprocessors, application-specific integrated circuits, and application-specific standard processors to systems companies for incorporation into various end products.
4) Alexion Pharmaceuticals, Inc. (ALXN)
Alexion Pharmaceuticals, Inc. has a Current Ratio of 2.30, a Quick Ratio of 2.03, a Return on Assets of 12.23%, and a Net Margin of 22.49%. The short interest was 1.95% as of 06/08/2012. Alexion Pharmaceuticals, Inc., a biopharmaceutical company, engages in the innovation, development, and commercialization of life-transforming therapeutic products for treating patients with severe and ultra-rare disorders in the United States, Europe, Latin America, Japan, and the Asia Pacific. It focuses on developing products for the treatment of diseases in the areas of hematology, nephrology, neurology, metabolic disorders, oncology, and ophthalmology. The company offers Soliris(eculizumab), a therapeutic product for the treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH), a blood disorder; and atypical hemolytic uremic syndrome (aHUS), an ultra-rare and life-threatening genetic disease.
5) Cerner Corporation (CERN)
|Industry:||Healthcare Information Services|
Cerner Corporation has a Current Ratio of 3.59, a Quick Ratio of 3.56, a Return on Assets of 11.60%, and a Net Margin of 14.06%. The short interest was 7.69% as of 06/08/2012. Cerner Corporation designs, develops, markets, installs, hosts, and supports healthcare information technology, healthcare devices, and content solutions for healthcare organizations and consumers worldwide. It offers the Cerner Millennium architecture, which combines clinical, financial, and management information systems that provides access to an individual's electronic health record (EHR) at the point of care, and organizes and delivers information for physicians, nurses, laboratory technicians, pharmacists, front and back-office professionals, and consumers. The company also provides the Healthe Intent platform, a cloud-based platform that sits above existing EHR systems and is designed to contain data from any EHR along with claims data, medical evidence, and research to facilitate proactive care.
6) Agilent Technologies Inc. (A)
|Industry:||Scientific & Technical Instruments|
Agilent Technologies Inc. has a Current Ratio of 3.28, a Quick Ratio of 2.76, a Return on Assets of 12.22%, and a Net Margin of 16.27%. The short interest was 1.26% as of 06/08/2012. Agilent Technologies, Inc. provides bio-analytical and electronic measurement solutions to the communications, electronics, life sciences, and chemical analysis industries worldwide. Its Electronic Measurement segment offers electronic measurement instruments and systems, and software design tools that are used in the design, development, manufacture, installation, deployment, and operation of electronics equipment and microscopy products. Its products consist of communications and general purpose test products.
7) Altera Corp. (ALTR)
|Industry:||Semiconductor - Specialized|
Altera Corp. has a Current Ratio of 4.07, a Quick Ratio of 3.96, a Return on Assets of 15.82%, and a Net Margin of 34.64%. The short interest was 1.85% as of 06/08/2012. Altera Corporation, a semiconductor company, designs, manufactures, and markets programmable logic devices (PLD), HardCopy application-specific integrated circuit (ASIC) devices, pre-defined design building blocks, and associated development tools. The company's PLDs consist of field-programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs), which are standard semiconductor integrated circuits or chips to perform desired logic functions in the electronic systems; and HardCopy structured ASIC devices that comprise transition customer designs from high-density FPGAs to low-cost non-programmable implementations for volume production. Its products primarily include Stratix series high-end, system-level FPGAs; Arria series mid-range transceiver and embedded processor equipped FPGAs; Cyclone series low-cost transceiver and embedded processor equipped FPGAs; MAX series CPLDs; and HardCopy ASICs. The company's products also comprise intellectual property cores in hard and soft forms that are pre-verified building blocks that execute system-level functions; and development tools consisting primarily of the Quartus II software for design entry, design compilation, design verification, and device programming.
8) Celgene Corporation (CELG)
Celgene Corporation has a Current Ratio of 3.71, a Quick Ratio of 3.51, a Return on Assets of 14.50%, and a Net Margin of 29.34%. The short interest was 1.39% as of 06/08/2012. Celgene Corporation, a biopharmaceutical company, discovers, develops, and commercializes various therapies to treat cancer and immune-inflammatory related diseases primarily in the United States and Europe. The company's commercial stage products include REVLIMID, an oral immunomodulatory drug for the treatment of patients with multiple myeloma and myelodysplastic syndromes (MDS); VIDAZA, a pyrimidine nucleoside analog to treat various subtypes MDS and acute myeloid leukemia; and THALOMID for patients with multiple myeloma, and for the prevention and suppression of the cutaneous manifestation of erythema nodosum leprosum recurrence. It also offers ABRAXANE to treat metastatic breast cancer; and ISTODAX for the treatment of cutaneous and peripheral T-cell lymphoma.
9) Analog Devices Inc. (ADI)
|Industry:||Semiconductor - Integrated Circuits|
Analog Devices Inc. has a Current Ratio of 8.10, a Quick Ratio of 7.55, a Return on Assets of 13.35%, and a Net Margin of 25.23%. The short interest was 1.74% as of 06/08/2012. Analog Devices, Inc. engages in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits (ICS) used in industrial, automotive, consumer, and communication applications. The company's signal processing products involve in converting, conditioning, and processing real-world phenomena, such as temperature, pressure, sound, light, speed, and motion into electrical signals. Its product range includes data converters, amplifiers and linear products, radio frequency ICs, power management products, sensors based on micro-electro mechanical systems technology and other sensors, and processing products.
*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.