Benjamin Graham, the pioneer of value investing, suggested investors to screen for the stocks of companies that have a current ratio of more than 2 and more working capital than long-term debt, as these measures indicate robust balance sheets.
A current ratio of more than 2 indicates that a company has the means to pay its short-term creditors. The ratio is calculated by dividing the total current assets by the total current liabilities.
When working capital surpasses the long-term debt, it means that the business can meet its financial obligations on long-term debt. The working capital is the difference between total current assets and total current liabilities.
Thus, investors may be interested in the following companies, as they meet the above conditions.
American Software Inc
American Software Inc (AMSWA, Financial) is an Atlanta, Georgia-based provider of supply chain management and retail planning solutions as well as IT staffing and consulting services to businesses and organizations worldwide.
The stock has a current ratio of 2.63, which is better than the industry median of 1.73.
American Software has trailing 12-month working capital of $69.4 million and no 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.
The stock price was trading at $19.84 per share at close on Monday for a market capitalization of $638.65 million, a price-book ratio of 5.41 and a 52-week range of $9.05 to $20.11.
Vishay Intertechnology Inc
Vishay Intertechnology Inc (VSH, Financial) is a Malvern, Pennsylvania-based manufacturer and supplier of semiconductors to U.S. and international industries.
The stock has a current ratio of 3.27, which is better than the industry median of 2.23.
Vishay Intertechnology has trailing 12-month working capital of about $1.2 billion and long-term debt of $499.2 million as of the most recent full fiscal year.
GuruFocus assigned a positive rating of 6 out of 10 for the company’s financial strength and a very good rating of 7 out of 10 for its profitability.
The stock price was trading at $16.43 per share at close on Monday for a market capitalization of $2.38 billion, a price-book ratio of 1.62 and a 52-week range of $11.23 to $23.25.
Astec Industries Inc
Astec Industries Inc (ASTE, Financial) is a Chattanooga, Tennessee-based manufacturer and seller of farm and heavy construction machineries to the U.S. and international companies.
The stock has a current ratio of 3.16, which is better than the industry median of 1.72.
Astec Industries has trailing 12-month working capital of $333.54 million and hardly any long-term debt as of the most recent full fiscal year.
GuruFocus assigned a high rating of 9 out of 10 for the company’s financial strength and a positive rating of 6 out of 10 for its profitability.
The stock price was trading at $41.98 per share at close on Monday for a market capitalization of $948.17 million, a price-book ratio of 1.56 and a 52-week range of $25.17 to $46.37.
Disclosure: I have no positions in any securities mentioned.
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