A Trio of High-Quality Stocks

Their robust balance sheets position these stocks to trade higher

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Feb 18, 2020
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To have more of a chance to unearth high-quality companies, Benjamin Graham, the pioneer of value investing, suggested selecting stocks with a current ratio of more than two and higher working capital than long-term debt.

The current ratio lets us know whether the financial resources of a company are enough to pay off its short-term creditors. The ratio is a found by dividing total current assets by total current liabilities.

When the working capital (the difference between total current assets and total current liabilities) surpasses the long-term debt, it means the company has resources that are adequate to meet the financial obligation from long-term debt.

In addition to meeting the above criteria, these three stocks also have positive ratings from sell-side analysts on Wall Street.

Utah Medical Products

Utah Medical Products Inc (

UTMD, Financial) is a Midvale, Utah-based developer, manufacturer and distributor of medical devices for U.S., European and international healthcare organizations.

The stock has a current ratio of 13.43, which is better than the industry median of 2.43.

Utah Medical Products has a trailing 12-month working capital of $51.44 million and no long-term debt as of the most recent full fiscal year.

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GuruFocus assigned a high rating of 8 out of 10 for the company’s financial strength and for its profitability.

Utah Medical Products Inc was trading at a share price of $93.40 at close on Friday for a market capitalization of $346.24 million.

The Peter Lynch chart indicates that the stock is not cheap.

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Wall Street issued a buy recommendation rating for shares of Utah Medical Products Inc.

NIC

NIC Inc (

EGOV, Financial) is an Olathe, Kansas-based provider of various digital services to businesses and citizens in the United States.

The company has a current ratio of 3.11, which is better than the industry median of 1.71.

NIC Inc has a trailing 12-month working capital of $212.13 million and no long-term debt as of the most recent full fiscal year.

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GuruFocus assigned a very 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.

NIC Inc was trading at a price of $21.07 per share at close on Friday for a market capitalization of $1.41 billion.

The Peter Lynch chart indicates that the stock is not trading at its cheapest price.

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Wall Street issued an overweight recommendation rating for this stock with an average target price of $24.

Steven Madden

Steven Madden Ltd (

SHOO, Financial) is a New York-based designer and marketer of fashion footwear and accessories for women, men and children worldwide.

The stock has a current ratio of 2.8, which is better than the industry median of 1.61.

Steven Madden has a trailing 12-month working capital of $478.44 million and no long-term debt as of the most recent full fiscal year.

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GuruFocus assigned a very 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.

Steven Madden Ltd was trading at a price of $37.34 per share at close on Friday for a market capitalization of $3.1 billion.

The stock is not cheap, according to the Peter Lynch chart.

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Wall Street issued an overweight recommendation rating for this stock and has established an average target price of $41 per share.

Disclosure: I have no positions in any securities mentioned.

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