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Alberto Abaterusso
Alberto Abaterusso
Articles (2532) 

3 High-Quality Stocks for the Value Investor

Their robust balance sheets indicate strength

April 03, 2020 | About:

To increase the likelihood to unearth high-quality companies, Benjamin Graham, the pioneer of value investing, recommended picking stocks with a current ratio of more than two and higher working capital than long-term debt.

These two metrics indicate whether the company is generating enough financial resources to sustain activities and pay off both short-term and long-term lenders.

The current ratio is constructed by dividing total current assets by total current liabilities, while the working capital is the difference between total current assets and total current liabilities.

Furthermore, these three stocks also have received positive recommendation ratings from Wall Street sell-side analysts.

Cal-Maine Foods

Cal-Maine Foods Inc (NASDAQ:CALM) is a Jackson, Mississippi-based producer and distributor of shell eggs.

The stock has a current ratio of 4.97, which is higher than the industry median of 1.59.

Cal-Maine Foods has a trailing 12-month working capital of $355.7 million and little long-term debt as of the most recent full fiscal year.

GuruFocus assigned a high rating of 8 out of 10 for the company’s financial strength and a very good rating of 7 out of 10 for its profitability.

Cal-Maine Foods’ stock closed at a price of $39.48 per share on Thursday for a market capitalization of $1.93 billion, a price-book ratio of 2.02 and a price-sales ratio of 1.63.

Wall Street recommends a hold rating for this stock with an average target price of $46.25 per share.

National Instruments

Based in Austin, Texas, National Instruments Corp (NASDAQ:NATI) provides a number of engineers and scientists worldwide with a software-centric platform and various systems.

The stock has a current ratio of 3.09, which is higher than the industry median of 1.7.

National Instruments has a trailing 12-month working capital of $641.3 million and no long-term debt as of the most recent full fiscal year.

GuruFocus assigned a very positive rating of 7 out of 10 for the company's financial strength and for its profitability.

National Instruments’ stock closed at a price of $32.90 per share on Thursday for a market capitalization of $4.3 billion, a price-book ratio of 3.67 and a price-sales ratio of 3.22.

Wall Street recommends a hold rating for this stock with an average target price of $39.25 per share.

InterDigital

InterDigital Inc (NASDAQ:IDCC) is a Wilmington, Delaware-based designer and developer of technologies for wireless communications in the U.S. and internationally.

The stock has a current ratio of 3.33, which is higher than the industry median of 1.07.

InterDigital Inc has a trailing 12-month working capital of $714 million, which exceeds the long-term debt of $350.6 million as of the most recent full fiscal year.

GuruFocus assigned a moderate rating of 5 out of 10 for the company’s financial strength and a high rating of 8 out of 10 for its profitability.

InterDigital Inc’s stock closed at a price of $43.58 per share on Thursday for a market capitalization of $1.34 billion, a price-book ratio of 1.78 and a price-sales ratio of 4.32.

Wall Street recommends a buy rating for this stock with an average target price of $94.60 per share.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. 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

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