1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Alberto Abaterusso
Alberto Abaterusso
Articles (2205) 

3 High-Quality Stocks for the Value Investor

Their robust balance sheets may serve as a catalyst to higher valuations

March 25, 2020 | About:

Benjamin Graham's financial strength criteria indicates that if investors choose stocks that have a current ratio higher than 2 and more working capital than long-term debt, their search has a higher likelihood of turning up 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.

The current ratio informs whether the financial resources of a company are enough to pay back its short-term creditors. The ratio is calculated by dividing total current assets by total current liabilities.

A working capital that exceeds long-term debt suggests that the company is able to satisfy all its long-term lenders as long as normal business operations are not significantly impacted. To obtain the working capital, total current liabilities are subtracted from total current assets.

Thus, investors may want to consider the following stocks, as they meet the above financial strength criteria. Furthermore, Wall Street sell-side analysts assigned positive recommendation ratings to them.

Hormel Foods

The first stock that meets the above-listed criteria is Hormel Foods Corp (NYSE:HRL), an Austin, Minnesota-based producer and marketer of various meat and food products to retailers and other commercial customers in the U.S. and internationally.

The stock has a current ratio of 2.34, which is positioned more strongly than the industry median of 1.6.

On a trailing 12-month basis, Hormel Foods has a working capital of $1.26 billion and a long-term debt of $250 million as of the most recent full fiscal year.

GuruFocus assigned the near the top score of 9 out of 10 to the companys financial strength rating and a very high score of 8 out of 10 to the companys profitability rating.

Hormel Foods traded at a share price of $44.85 at close on Tuesday for a market capitalization of $24.12 billion. The Peter Lynch chart indicates that the stock isnt trading cheaply.

Wall Street recommends a hold rating for this stock and has set an average target price of $41.60 per share.

Old Dominion Freight Lines Inc

The second stock that meets the above-listed criteria is Old Dominion Freight Lines Inc (NASDAQ:ODFL), a Thomasville, North Carolina-based provider of regional, inter-regional and national less-than-truckload and expedited transportation services in North America.

The company has a current ratio of 2.13, which is much better than the industry median of 1.13.

On a trailing 12-month basis, Old Dominion Freight Lines has a working capital of $500.75 million and a long-term debt of $45 million as of the most recent full fiscal year.

GuruFocus assigned the near the top score of 9 out of 10 to both the companys financial strength rating and its profitability rating.

Old Dominion Freight Lines Inc traded at a price of $125.25 per share at close on Tuesday for a market capitalization of $14.97 billion.

The Peter Lynch chart indicates that the stock is not expensive, as its share price trades close to the earnings line.

Wall Street recommends holding this stock and has set an average target price of $199.91 per share.

Gorman-Rupp Co

The third stock that meets the above-listed criteria is Gorman-Rupp Co (NYSE:GRC), a Mansfield, Ohio-based designer, manufacturer and seller of pumps and pump systems worldwide.

The stock has a current ratio of 5, which is much better than the industry median of 1.87.

On a trailing 12-month basis, Gorman-Rupp has a working capital of $182.17 million and no long-term debt as of the most recent full fiscal year.

GuruFocus assigned the highest score of 10 out of 10 to the financial strength rating and a very high score of 8 out of 10 to the profitability rating of the company.

Gorman-Rupp Co traded at a price of $27.81 per share at close on Tuesday for a market capitalization of $724.94 million. The Peter Lynch chart suggests that this stock is not at its cheapest.

Wall Street recommends buying shares of this stock and has set an average target price of $41 per share.

Disclosure: I have no positions in any securities mentioned

Read more here:

Not a Premium Member of GuruFocus? Sign up for afree 7-day trial here.

About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about gold, silver and precious metals mining industries. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master's Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:



Performances of the stocks mentioned by Alberto Abaterusso


User Generated Screeners


pjmason14Momentum
pascal.van.garsseHigh FCF-M2
kosalmmuse6
kosalmmuseBest one1
DBrizanall 2019Feb26
kosalmmuseBest one
DBrizanall 2019Feb25
kosalmmuseNice
kosalmmusehan
MsDale*52-Week Low
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)