Benjamin Graham's financial strength criteria indicates that if investors screen for stocks that have a current ratio higher than 2 and more working capital than long-term debt, their search is more likely to result in high-quality companies.
The current ratio indicates whether the company has enough funds to reimburse its short-term creditors and is calculated by dividing the total current assets by the total current liabilities.
A working capital that exceeds long-term debt signals that the company can continue to operate while meeting all its long-term financial obligations.
In addition to meeting the above criteria, these three stocks also have positive recommendation ratings from Wall Street sell-side analysts.
Garmin
Garmin Ltd (GRMN, Financial) is a Swiss designer, manufacturer and seller of several navigation, communication and information devices worldwide.
The stock has a current ratio of 2.64, which is higher than the industry median of 1.91.
Garmin has a trailing 12-month working capital of $1.74 billion and no long-term debt as of the most recent full fiscal year.
GuruFocus assigned a positive rating of 7 out of 10 for the company’s financial strength and a high rating of 8 out of 10 for its profitability.
Garmin traded at a price of $98.85 per share on Tuesday for a market capitalization of $18.79 billion.
According to the Peter Lynch chart, the stock is not at its cheapest.
Wall Street issued a hold recommendation rating for shares of Garmin with an average target price of $90 per share.
Quaker Chemical
Quaker Chemical Corp (KWR, Financial) is a Conshohocken, Pennsylvania-based developer, producer and marketer of various formulated chemical specialty products for heavy industrial and manufacturing applications.
The stock has a current ratio of 2.1, which is better than the industry median of 1.79.
Quaker Chemical has a trailing 12-month working capital of $267 million and a trailing 12-month long-term debt of nearly $36 million as of the most recent full fiscal year.
GuruFocus assigned a moderate rating of 4 out of 10 for the company’s financial strength and a high rating of 8 out of 10 for its profitability.
Quaker Chemical traded at $174.66 per share at close on Tuesday for a market capitalization of $3.1 billion.
According to the Peter Lynch chart, the stock is not cheap.
Wall Street issued a hold recommendation rating for shares of Quaker Chemical with an average target price of $168.25 per share.
Kulicke & Soffa Industries
Kulicke & Soffa Industries Inc (KLIC, Financial) is a Singapore-based designer, manufacturer and seller of capital equipment and tools to semiconductor devices assemblers.
The company has a current ratio of 4.58, which is much better than the industry median of 2.25.
Kulicke & Soffa Industries has a trailing 12-month working capital of $724.4 million and no long-term debt as of the most recent full fiscal year.
GuruFocus assigned a very high rating of 8 out of 10 for the company's financial strength and its profitability.
Kulicke & Soffa Industries traded at $26.77 per share at close on Tuesday for a market capitalization of $1.71 billion.
According to the Peter Lynch chart, the stock is trading far above its fair value.
Wall Street issued an overweight recommendation rating for shares of the company with an average target price of $33.50.
Disclosure: I have no positions in any securities mentioned.
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