Company liquidity is an important consideration in any stock analysis. Liquidity gives a company the ability to make large acquisitions if it sees investment opportunities, a cushion for future lulls in demand, and most importantly, it keeps a company's doors open. For mid cap companies, cash on hand can translate to future growth. Are these the types of stocks that you're looking for? If the answer is 'yes', here are some interesting ideas to get you started.
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 Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.
We first looked for mid cap stocks. From here, we then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We then screened for businesses with strong profit margins (1-year operating margin>15%)(1-year fiscal EPS growth rate>10%). We did not screen out any sectors.
Do you think these mid-cap stocks have strong enough fundamentals to move higher? Use our list to help with your own analysis.
1) IPG Photonics Corporation (NASDAQ:IPGP)
|Industry:||Semiconductor - Integrated Circuits|
IPG Photonics Corporation has a Current Ratio of 6.28, a Quick Ratio of 5.08, a Operating Profit Margin of 37.49%, and a Earnings Per Share Growth Rate of 112.33%. The short interest was 17.61% as of 07/03/2012. IPG Photonics Corporation develops and manufactures fiber lasers, fiber amplifiers, and diode lasers. Its laser products include low, medium, and high output power lasers from 0.5 to 2 microns in wavelength; fiber pigtailed packaged diodes and fiber coupled direct diode laser systems; high-energy pulsed lasers, multi-wavelength and tunable lasers, and single-polarization and single-frequency lasers; solid-state lasers; laser diode chips and packaged laser diodes operating at 9XX nanometers; and high power optical fiber delivery cables, fiber couplers, beam switches, chillers, and accessories.
2) Terra Nitrogen Company, L.P. (NYSE:TNH)
Terra Nitrogen Company, L.P. has a Current Ratio of 4.63, a Quick Ratio of 4.18, a Operating Profit Margin of 63.92%, and a Earnings Per Share Growth Rate of 91.36%. The short interest was 4.53% as of 07/03/2012. Terra Nitrogen Company, L.P. engages in the production and sale of nitrogen fertilizer products. It primarily offers anhydrous ammonia and urea ammonium nitrate solutions.
3) Randgold Resources Limited (NASDAQ:GOLD)
Randgold Resources Limited has a Current Ratio of 5.47, a Quick Ratio of 4.03, a Operating Profit Margin of 46.23%, and a Earnings Per Share Growth Rate of 269.48%. The short interest was 1.11% as of 07/03/2012. Randgold Resources Limited, together with its subsidiaries, engages in exploring, developing, and operating gold mines in west and east Africa. It also engages in diamond drilling activities. The company holds a 40% interest in Morila mine and an 80% interest in Loulo mine, as well as owns an 81% interest in Tongon project in northern Cote d'Ivoire.
4) Graco Inc. (NYSE:GGG)
Graco Inc. has a Current Ratio of 4.73, a Quick Ratio of 3.91, a Operating Profit Margin of 24.18%, and a Earnings Per Share Growth Rate of 37.12%. The short interest was 1.75% as of 07/03/2012. Graco Inc. designs, manufactures, and markets systems and equipment to pump, meter, mix, and dispense various fluids and semi-solids worldwide. It operates in three segments: Industrial, Contractor, and Lubrication. The Industrial segment provides equipment to apply paint and other coatings to motor vehicles, appliances, furniture, and other industrial and consumer products; and process pump equipment that move and dispense chemicals, and liquid and semi-solid foods.
5) Dolby Laboratories, Inc. (NYSE:DLB)
Dolby Laboratories, Inc. has a Current Ratio of 8.64, a Quick Ratio of 8.53, a Operating Profit Margin of 44.17%, and a Earnings Per Share Growth Rate of 11.86%. The short interest was 5.06% as of 07/03/2012. Dolby Laboratories, Inc. provides products, services, and technologies for the entertainment industry worldwide. It designs and manufactures video and audio products for film production, cinema, and television broadcast industries; and provides services to support film production, television broadcast, and music production. The company is involved in licensing technologies in signal processing systems that enhance sound quality or enable surround sound in movie soundtracks, DVDs, Blu-ray Discs, personal computers, digital televisions, mobile devices, video games, satellite and cable broadcasts, and online streaming; and developing technologies for mobile devices for 3D, digital cinema, post-production, and LED backlit LCD televisions.
6) Pan American Silver Corp. (NASDAQ:PAAS)
Pan American Silver Corp. has a Current Ratio of 5.49, a Quick Ratio of 4.16, a Operating Profit Margin of 40.32%, and a Earnings Per Share Growth Rate of 2487.25%. The short interest was 1.67% as of 07/03/2012. Pan American Silver Corp. engages in the exploration, acquisition, development, and operation of silver properties. The company also focuses on copper, zinc, lead, and gold minerals. It has mining operations in Mexico, Peru, Argentina, and Bolivia; and has non-producing silver resources in the United States and Argentina.
7) Gentex Corp. (NASDAQ:GNTX)
Gentex Corp. has a Current Ratio of 6.04, a Quick Ratio of 4.50, a Operating Profit Margin of 22.26%, and a Earnings Per Share Growth Rate of 16.62%. The short interest was 6.84% as of 07/03/2012. Gentex Corporation designs, develops, manufactures, and markets electro-optical products for the automotive, commercial building, and aircraft industries primarily in the United States, Germany, and Japan. It offers automotive mirrors, including automatic-dimming rearview mirrors, such as interior auto-dimming mirrors and exterior auto-dimming mirror sub-assemblies; and non-automatic-dimming rearview mirrors with electronic features. The company also provides fire protection products, which include smoke alarms and smoke detectors combined with various models of signaling appliances for office buildings, hotels, motels, military bases, college dormitories, nursing homes, and other commercial establishments; and single-station alarms for commercial and residential applications. In addition, it offers variable dimmable windows to the aircraft manufacturers.
*Company profiles were sourced from Finviz. Financial data was sourced from Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.