A company that is generating solid profits and has ample cash on hand can even out some of the apprehension that is associated with investments in the technology sector. When a company has these attributes in its favor, it sends a positive message that there is experienced fiscal management at the helm. Additionally, when a company is producing strong earnings, the cash reserves can be used for funding growth enhancing strategies. We think you will enjoy reviewing the list of liquid and profitable tech stocks we have summarized below.
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 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
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 technology stocks. We then looked for companies that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We next screened for businesses that have strong bottom line profitability (Net Margin [TTM]>10%)(1-year fiscal EPS growth rate>10%). We did not screen out any market caps.
Do you think these stocks will outperform? Use our list to help with your own analysis.
1) Silicom Ltd. (NASDAQ:SILC)
|Industry||Networking & Communication Devices|
|Earnings Per Share Growth Rate||43.08%|
Silicom Ltd. engages in the design, manufacture, marketing, and support of connectivity solutions for a range of servers and server based systems in the North America, Europe, and internationally. The company primarily offers high-end server networking cards with and without bypass that are known as server adapters. Its server adapters are used in various applications that include security appliances, wide area network optimization appliances, load balancing and traffic management appliances, network-attached storage, video on demand servers, content delivery servers, Internet service providers/Web hosting, and high end computing. Silicom Ltd. also offers intelligent and programmable cards, such as encryption acceleration cards and redirector cards; intelligent stand alone bypass units; 10 Gbps products with and without bypass; and server to appliance converters. It markets its products through original equipment manufacturers, distributors, and resellers. The company was founded in 1987 and is based in Kfar Sava, Israel.
2) Aware Inc. (NASDAQ:AWRE)
|Earnings Per Share Growth Rate||1287.89%|
Aware, Inc. supplies various products for the biometrics and digital subscriber line (NYSE:DSL) service assurance industries primarily in the United States and Germany. It provides biometrics software products, including software development kits (SDKs); BioComponents; biometrics services platform to build and deploy server-based biometric data processing and workflow solutions; universal registration client that performs various biometric data capture, analysis, matching, formatting, and hardware abstraction functions; URC Mobile for performing biometric enrollment, identification, and screening on mobile biometric devices; FormScannerSE and FormScannerMB for scanning and processing of inked fingerprint cards; Forensic Workbench for the categorization, processing, and standards-compliant formatting of biometric images and demographic data; and WebEnroll for browser-based enrollment of biographic data, fingerprints, and facial images.
The company also offers medical imaging products comprising AccuRad ImageShare server that provides viewing of medical images; AccuRad REM server, which collects radiation exposure estimation data, and then stores and analyzes the data to calculate exposure information; and AccuRad SDKs. In addition, it offers advanced imaging products, such as ArchivePack to store and distribute digital imagery; JPEG 2000 image compression software; and SeisPact for the storage and satellite transmission of seismic data from ships. Further, the company provides DSL service assurance products consisting of DSL diagnostics and management software; and DSL test modules for integration into DSL testhead and test set equipment. Additionally, it sells and/or licenses patents that are related to communications, signal processing, and compression technologies. The company serves governments and corporate customers through systems integrator, OEM, and direct sales channels. Aware, Inc. was founded in 1986 and is headquartered in Bedford, Massachusetts.
3) InvenSense, Inc. (NYSE:INVN)
|Industry||Semiconductor Equipment & Materials|
|Earnings Per Share Growth Rate||1713.57%|
InvenSense, Inc. designs, develops, markets, and sells micro-electro-mechanical systems gyroscopes for motion tracking devices in consumer electronics. The company delivers motion interface solutions based on its multi-axis gyroscope technology by targeting applications in video gaming devices, smartphones, tablet devices, digital still and video cameras, smart TVs, 3D mice, wearable health and fitness monitors, optical image stabilization products, and portable navigation devices. It offers MotionProcessor units (MPUs), inertial measurement units (IMUs), and MEMS gyroscopes.
The company's products comprise MPU-9150, which combines three-axis MEMS gyroscope, three-axis MEMS accelerometer, MotionFusion technology, and MotionApps platform with a third-party three-axis e-compass to provide nine-axis motion interface on a single chip; MPU-6000 that integrates a three-axis gyroscope and three-axis accelerometer on one chip with MotionApps platform designed for the smartphone and tablet markets; and MPU-3000, which combines three-axis digital gyroscope, MotionFusion technology, and MotionApps.
Its products also include IMU-3000 products that combine the three-axis MEMS gyroscope with mixed-signal circuitry and a secondary input port that interfaces with third-party digital accelerometers to deliver six-axis MotionFusion output to the host processor; and ITG-3000, IDG-2020 and IXZ-2020, and IDG-2000 digital gyroscopes to measure rotational motion around one or more axes and provide the results through an analog or digital output. It sells its products to manufacturers of consumer electronics devices, original design manufacturers, and contract manufacturers through direct sales organization and indirect channel distributors internationally. The company was founded in 2003 and is headquartered in Sunnyvale, California.
4) China Digital TV Holding Co., Ltd. (NYSE:STV)
|Earnings Per Share Growth Rate||22.06%|
China Digital TV Holding Co., Ltd., through its subsidiaries, provides conditional access systems to the digital television market in the People's Republic of China. Its CA systems consist of smart cards, head-end software for television network operators, and terminal-end software for set-top box manufacturers, which enable digital television network operators to control the distribution of content and value-added services to their subscribers and block unauthorized access to their networks. The company also licenses its set-top box design to set-top box manufacturers; and sells digital television application software, such as electronic program guides and subscriber management systems to digital television network operators.
In addition, it provides system integration services for television network operators, who are digitalizing and installing the company's CA systems. China Digital TV Holding Co., Ltd. sells its CA systems and digital television application software directly through its sales personnel to television network operators, including cable, satellite, and terrestrial television network operators; enterprises that maintain private cable television networks within their facilities; and media operators. The company was founded in 2004 and is headquartered in Beijing, the People's Republic of China.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/04/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.