Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Zacks.com featured highlights: Applied Materials, Lumentum Holdings, Square, Zendesk and Visteon

For Immediate Release

Chicago, IL – April 10, 2017 - Stocks in this week’s article include Applied Materials Inc. (NASDAQ: AMAT Free Report ), Lumentum Holdings Inc. (NASDAQ: LITE Free Report ), Square Inc (NYSE: SQ Free Report ), Zendesk Inc. (NYSE: ZEN Free Report ) and Visteon Corp. (NYSE: VC Free Report ).

Screen of the Week of Zacks Investment Research:

Bet on These 5 Liquid Stocks for Solid Returns

Liquidity is an important yardstick that indicates a company’s capability to meet debt obligations by converting assets into cash. Liquid stocks have always been in demand owing to their potential to provide maximum returns.

A company with a favorable liquidity position always has the potential to provide higher returns as liquidity drives growth. However, one should exercise caution before investing in such stocks. While a high liquidity level may imply that the company is meeting its obligations at a faster rate compared to peers, it may also indicate that the company is failing to use its assets efficiently.

Hence, one may consider the efficiency level of a company in addition to its liquidity to identify potential winners.

Measures to Identify Liquid Stocks

Liquidity ratios like Current Ratio, Quick Ratio and Cash Ratio are primarily used to identify companies with strong liquidity.

Current Ratio : It measures current assets relative to current liabilities. This ratio is used for measuring a company’s potential to meet both short- and long-term debt obligations. Thus, a current ratio – also known as working capital ratio – below 1 indicates that the company has more liabilities than assets. However, a high current ratio does not always indicate that the company is in good financial shape. It may also mean that the company has failed to utilize its assets significantly. Hence, a range of 1 to 3 is considered to be ideal.

Quick Ratio : Unlike current ratio, quick ratio – also called “acid-test ratio" or "quick assets ratio" – indicates a company’s ability to pay short-term obligations. It considers inventory excluding current assets relative to current liabilities. Like the current ratio, a quick ratio of greater than 1 is desirable.

Cash Ratio : This is the most conservative ratio among the three, as it takes into account only cash and cash equivalents, and invested funds relative to current liabilities. It measures a company’s ability to pay its current debt obligations using the most liquid of assets. Though a cash ratio higher than 1 may point to sound financials, a high number may indicate inefficiency in using the cash.

So, a ratio of greater than 1 is desirable at all times but may not always underline a company’s financial health.

Screening Parameters

In order to pick the best of the lot, we have added asset utilization, which is a widely used measure of a company’s efficiency, as one of the screening criteria. Asset utilization is a ratio of total sales over the past 12 months to the last four-quarter average of total assets. Though this ratio varies across industries, companies with a ratio higher than their respective industries can be considered efficient.

In order to ensure that these liquid and efficient stocks have solid growth potential, we have added our proprietary Growth Style Score to the screen.

Current Ratio, Quick Ratio and Cash Ratio between 1 and 3 (While liquidity ratios of greater than 1 are desirable, significantly high ratios may indicate inefficiency.)

Asset utilization greater than industry average (Higher asset utilization than the industry average indicates a company’s efficiency.)

Zacks Rank equal to #1 (Only Strong Buy-rated stocks can get through. You can see the complete list of today’s Zacks #1 Rank stocks here .)

Growth Style Score less than or equal to B

(Back-tested results show that stocks with a Growth Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 handily beat other stocks.)

These criteria have narrowed down the universe of over 7,700 stocks to only eight.

Here are five of the eight stocks that qualified the screen:

Applied Materials Inc . (NASDAQ:AMAT Free Report ) provides manufacturing equipment, services and software to the semiconductor, display, and related industries worldwide. The company has a Growth Style Score of ‘B’ and an average four-quarter positive earnings surprise of 3.92%. The Zacks Consensus Estimate for 2017 earnings increased 1.1% (3 cents) to $2.65 over the last 30 days.

Applied Materials’ one-year return of 85.7% is better than the Zacks Semiconductor Equipment - Wafer Fabrication industry’s gain of 51.5%.

Milpitas, CA-based Lumentum Holdings Inc. (NASDAQ: LITE Free Report ) is a manufacturer and seller of innovative optical and photonic products. The company has a Growth Style Score of ‘A’ and an average four-quarter positive earnings surprise of 17.27%. Moreover, the Zacks Consensus Estimate for 2017 earnings increased by a penny to $1.68 over the last 30 days.

Lumentum’s one-year return of 78.3% is higher than the Zacks Lasers-Systems and Components industry’s addition of 33.5%.

San Francisco, CA-based Square Inc (NYSE: SQ Free Report ) offers financial and marketing services. The company has a Growth Style Score of ‘B’ and an average four-quarter positive earnings surprise of 23.33%. The Zacks Consensus Estimate for 2017 has remained steady at a loss of 25 cents over the last 30 days.

Square’s one-year return of 12.4% is much better than the Zacks Internet Software industry’s increase of 9.6%.

Zendesk Inc. (NYSE:ZEN Free Report ) provides a software-as-a-service, or SaaS, customer service platform. It provides customer service in a wide range of languages in various industries. The company has a Growth Style Score of ‘A’ and an average four-quarter positive earnings surprise of 12.68%. Further, the Zacks Consensus Estimate for 2017 has remained stable at a loss of 99 cents over the last 30 days.

Zendesk’s one-year return of 30.7% is better than the Zacks Internet Software industry’s gain of 9.6%.

Headquartered in Michigan, Visteon Corp. (NYSE: VC Free Report ) operates as an automotive supplier engaged in the design, engineering and manufacturing of innovative climate, electronic, interior and lighting products for vehicle manufacturers. The company has a Growth Style Score of ‘B’ and an average four-quarter positive earnings surprise of 47.09%. The Zacks Consensus Estimate for 2017 earnings remained steady at $5.51 over the last 30 days.

Visteon gained 24.2% in the last one year, compared with the Zacks Auto/Truck Original Equipment industry’s gain of 18.7%.

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back testing software.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today .

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance .

Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »

Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don’t wait for the market to get better before you decide to do better. Start learning how to be a better trader today: https://at.zacks.com/?id=111

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

About Screen of the Week

Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros .

Get the full Report on AMAT - FREE

Get the full Report on LITE - FREE

Get the full Report on SQ - FREE

Get the full Report on ZEN - FREE

Get the full Report on VC - FREE

Follow us on Twitter:

Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch"> https://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Contact: Jim Giaquinto

Company: Zacks.com

Phone: 312-265-9268

Email: pr@zacks.com

Visit: https://www.zacks.com/performance

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer .

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Applied Materials, Inc. (AMAT): Free Stock Analysis Report
 
Lumentum Holdings Inc. (LITE): Free Stock Analysis Report
 
Square, Inc. (SQ): Free Stock Analysis Report
 
Zendesk, Inc. (ZEN): Free Stock Analysis Report
 
Visteon Corporation (VC): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research