The current economy has normalized the tendency for organizations to access reserves or borrow against assets to balance the budget. That is what reserves are for after all - keeping the doors open and treading water until things pick up. So it makes it even more remarkable when we find companies that have not tapped into lines of credit and have maintained a high level of liquidity. For our scan today, we focused on consumer stocks, and found companies that have minimal debt and substantial cash reserves. These two complimentary traits lead us to companies with strong fiscal guidance that are well positioned to make strategic growth enhancing moves. If consumer stocks with these qualities interest you, then you will like the list below.
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 consumer stocks. Next, we screened for businesses that have maintained a sound long term capital structure (Long-Term D/E Ratio<.1). We then screened for businesses that operate with little to no debt (D/E Ratio<.1). Next, we screened for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any market caps.
Do you think these stocks will break through to new highs? Use our list to help with your own analysis.
1) Shuffle Master Inc. (SHFL)
|Industry||Recreational Goods, Other|
|Long Term Debt/Equity Ratio||0.06|
Shuffle Master, Inc. manufactures and distributes gaming devices, and operates inter-casino linked systems and slot routes. It leases, licenses, and sells its products. The company operates through four segments: Utility, Proprietary Table Games, Electronic Table Systems, and Electronic Gaming Machines. The Utility segment provides automatic card shufflers, roulette chip sorters, and deck verification devices. This segment also offers i-Shoe Auto card reading shoe that gathers data and enables casinos to track table game play; and i-Score baccarat viewer that displays current game results and trends.
The Proprietary Table Games segment develops and delivers live and electronic proprietary table games, and progressive table games with bonusing options and proprietary side bets, as well as i-Gaming products, which feature online versions of its table games, social gaming, and mobile applications. The Electronic Table Systems segment provides develops and delivers various products involving popular table game content using e-Table game platforms. This segment's primary products include i-Table, Table Master, Vegas Star, and Rapid Table Games products.
The Electronic Gaming Machines segment provides its PC-based video slot machines in various markets, primarily in Australasia. It offers a selection of video slot titles, which include a range of bonus round options that can be configured as a network of machines or as stand-alone units. This segment also sells software conversion kits that allow existing electronic gaming machines terminals to be converted to other games on the PC3 and PC4 platform; and develops a range of games using the Pink Panther brand, and Equinox that offers widescreen displays. The company markets its products to casinos and other legal gaming establishments through its direct sales force, and various distributors and/or representatives worldwide. Shuffle Master, Inc. was founded in 1983 and is headquartered in Las Vegas, Nevada.
2) 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. Its Marine division provides containerized cargo shipping service; and operates a terminal at the Port of Miami, an off-dock warehouse for cargo consolidation and temporary storage, and a cargo terminal facility at the Port of Houston for temporary storage of bagged grains, resins, and other cargoes.
As of December 31, 2011, it operated 9 owned and approximately 28 chartered vessels; and dry, refrigerated, and specialized containers and other related equipment. The company's Sugar division grows sugar cane, produces and refines sugar, produces alcohol, and purchases and resells sugar to retailers, soft drink manufacturers, and food manufacturers. Its Power division operates as an independent power producer in the Dominican Republic operating two floating power generating facilities with a system of diesel engines. The company's Turkey division produces, processes, and markets branded and non-branded turkeys, and other turkey products. The company also purchases and processes jalapeo peppers in the United States. Seaboard Corporation was founded in 1928 and is headquartered in Shawnee Mission, Kansas.
3) Buckeye Technologies Inc. (BKI)
|Industry||Paper & Paper Products|
|Long Term Debt/Equity Ratio||0.10|
Buckeye Technologies Inc. engages in the manufacture and distribution of cellulose-based specialty products. It operates in two segments, Specialty Fibers and Nonwoven Materials. The Specialty Fibers segment offers chemical cellulose, customized fibers, and fluff pulp derived from wood and cotton cellulose materials using wetlaid technology. The Nonwovens Materials segment provides airlaid nonwoven materials derived from wood pulps, synthetic fibers, and other materials using airlaid technology. The company's products are used in various applications, such as disposable diapers, personal hygiene products, engine air and oil filters, food casings, rayon filament, acetate plastics, thickeners, and papers. Buckeye Technologies Inc. markets and sells its products directly through its sales force, as well as through sales agents in North America, Europe, Asia, South America, and other countries. The company was founded in 1992 and is headquartered in Memphis, Tennessee.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on September 17, 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.