Most people can relate to the feeling of heaviness that comes along with accruing unmanageable debt. On the flip side, substantial amounts of cash in the bank can provide a sense of possibility. The same is true in the world of business. Debt limits options, and large cash reserves keeps doors wide open. Today we ran a screen to find mid cap stocks that have minimal debt and plenty of cash on hand. With these two components in place, companies are well positioned for growth. We think you will find our list worthy of further research.
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.
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 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).
We first looked for mid cap stocks. We then screened for businesses that have maintained a sound long term capital structure (Long Term D/E Ratio<.1). From here, we then looked for companies that have maintained a sound capital structure (D/E Ratio<.1). We then looked for companies with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any sectors.
Do you think these mid-cap stocks deserve to trade higher? Use our list along with your own analysis.
1) Seaboard Corp. (SEB)
|Long Term Debt/Equity Ratio||0.06|
Seaboard Corporation operates as a diversified agribusiness and transportation company worldwide. Its Pork division engages in hog production and pork processing; and the production and sale of fresh and frozen pork products, such as lunchmeat, ham, bacon, sausage, loins, tenderloins, and ribs, as well as further processed pork products, including raw and pre-cooked bacon to further processors, foodservice operators, grocery stores, distributors, and retail outlets under the Prairie Fresh and Daily's brand names. This division also produces and sells biodiesel from pork and other animal fats, and vegetable oil to third parties. The company's Commodity Trading and Milling division sources, transports, and markets wheat, corn, soybean meal, rice, and other commodities, as well as operates grain and feed milling businesses.
2) Chipotle Mexican Grill, Inc. (CMG)
|Long Term Debt/Equity Ratio||0.00|
Chipotle Mexican Grill, Inc. develops and operates fast-casual, fresh Mexican food restaurants in the United States, Canada, the United Kingdom, and France. Its restaurants primarily offer burritos, tacos, burrito bowls, and salads. As of June 30, 2012, it operated approximately 1,316 Chipotle restaurants.
3) CLARCOR Inc. (CLC)
|Long Term Debt/Equity Ratio||0.02|
CLARCOR Inc. provides filtration products, filtration systems and services, and consumer and industrial packaging products worldwide. Its Engine/Mobile Filtration segment offers oil, air, fuel, coolant, transmission, and hydraulic fluid filters for engines used in stationary power generation and for engines in mobile equipment applications, including trucks, automobiles, buses, and locomotives, as well as marine, construction, industrial, mining, and agricultural equipment. The company's Industrial/Environmental Filtration segment manufactures specialty industrial process liquid filters; filters for pharmaceutical processes and beverages; filtration systems, filters, and coalescers for the oil and natural gas industry; filtration systems for aircraft refueling, anti-pollution, sewage treatment, and water recycling; bilge water separators; sand control filters for oil and gas drilling; and woven wire and metallic products for filtration of plastics and polymer fibers.
4) Quanta Services, Inc. (PWR)
|Long Term Debt/Equity Ratio||0.01|
Quanta Services, Inc. provides specialty contracting services primarily in North America. The company's Electric Power Infrastructure Services segment designs, installs, upgrades, repairs, and maintains electric power transmission and distribution networks, and substation facilities; renewable energy generation facilities; and offers emergency restoration services, including repairing infrastructure to the electric power industry. Its Natural Gas and Pipeline Infrastructure Services segment designs, installs, repairs, and maintains natural gas and oil transmission and distribution systems, compressor and pump stations, and gas gathering systems, as well as offers related trenching, directional boring, and automatic welding services; and pipeline protection, integrity testing, rehabilitation and replacement, and fabrication of pipeline support systems, and related structures and facilities.
5) Teradyne Inc. (TER)
|Industry||Semiconductor Equipment & Materials|
|Long Term Debt/Equity Ratio||0.10|
Teradyne, Inc., together with its subsidiaries, provides automatic test equipment products and services worldwide. The company operates in three segments: Semiconductor Test, Systems Test Group, and Wireless Test. The Semiconductor Test segment designs, manufactures, and sells semiconductor test products and services.
6) Catamaran Corporation (CTRX)
|Long Term Debt/Equity Ratio||0.08|
Catamaran Corporation provides pharmacy benefit management (PBM) services and healthcare information technology solutions to the healthcare benefits management industry in North America. The company offers informedRx, a suite of PBM services; and RxCLAIM, an online transaction processing system to provide online adjudication of third-party prescription drug claims at the point of service, such as claims management and review, as well as payment and billing support and real-time functionality for updating benefit, price, member, provider, and drug details. It also provides Integrail Pathfinder, a software application that enables the users to understand the impact of healthcare resource allocation and medical decision-making; IntegrailRx, which measures and predicts both pharmacy and total risk using pharmacy claims; RxBUILDER, a Web-based interface for formulary creation and maintenance; RxPORTAL, which allows customers to interact with the patient's formulary and drug history; RxAUTH, a prior authorization (PA) management solution for automating PA process; and RxTRACK, a data warehouse and analysis system.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/22/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.