A commonality among successful companies is their commitment to tight fiscal controls. Companies with savvy financial acumen have substantial cash reserves and have not over utilized debt as a source of funding. With this in mind, we focused on the industrial sector to find stocks with a high level of liquidity and minimal debt. These companies are well positioned for long-term sustainability and it allows them to maintain focus on growth enhancing activities. We think you will find our list of industrial stocks worthy of further investigation.
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 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.
We first looked for industrial stocks. We then screened for businesses that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We then screened for businesses that have maintained a sound capital structure (D/E Ratio<.1). We did not screen out any market caps.
Do you think these stocks offer both value and growth? Use our list to help with your own analysis.
1) Zebra Technologies Corp. (ZBRA)
Zebra Technologies Corporation offers products and solutions that assist in identifying, authenticating, and tracking assets, people, and transactions. The company's products include direct thermal and thermal transfer label and receipt printers, radio frequency identification printer/encoders, dye sublimation card printers, real-time location solutions, and related accessories and support software. Zebra Technologies Corporation was founded in 1969 and is headquartered in Lincolnshire, Illinois.
2) Energy Recovery, Inc. (ERII)
|Industry||Pollution & Treatment Controls|
Energy Recovery, Inc. develops, manufactures, and sells energy recovery devices, and high-pressure and circulation pumps primarily for use in seawater desalination in the United States and internationally. The company markets and sells its products through its sales organization and through authorized, independent sales agents. Energy Recovery, Inc. was founded in 1992 and is headquartered in San Leandro, California.
3) AeroVironment, Inc. (AVAV)
|Industry||Aerospace/Defense Products & Services|
AeroVironment, Inc. engages in the design, development, production, support, and operation of unmanned aircraft systems, and efficient energy systems for various industries and governmental agencies. AeroVironment, Inc. sells its products to organizations within the Department of Defense, including the U.S. Army, Marine Corps, Special Operations Command, and Air Force, as well as to commercial, consumer, and government customers. The company was incorporated in 1971 and is headquartered in Monrovia, California.
4) RBC Bearings Inc. (ROLL)
|Industry||Machine Tools & Accessories|
RBC Bearings Incorporated manufactures and markets engineered precision plain, roller, and ball bearings primarily in North America, Europe, and Latin America. It operates in four segments: Plain Bearings, Roller Bearings, Ball Bearings, and Others. It serves construction and mining, oil and natural resource extraction, heavy truck, rail, packaging, and semiconductor machinery; and aerospace and defense markets. The company offers its products through direct sales force, and a network of industrial and aerospace distributors. RBC Bearings Incorporated is headquartered in Oxford, Connecticut.
5) Fastenal Company (FAST)
|Industry||General Building Materials|
Fastenal Company, together with its subsidiaries, operates as a wholesaler and retailer of industrial and construction supplies in the United States and internationally. The company serves the construction market, which consists of general, electrical, plumbing, sheet metal, and road contractors; and manufacturing market, including original equipment manufacturers, and maintenance and repair operations, as well as other users, such as farmers, truckers, railroads, mining companies, federal, state and local governmental entities, schools, and retail trades. As of December 31, 2011, it operated 2,585 stores. The company was founded in 1967 and is headquartered in Winona, Minnesota.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/22/2012.