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Alberto Abaterusso
Alberto Abaterusso
Articles (2265) 

3 High-Quality Stocks for the Value Investor

These companies have robust balance sheets

June 14, 2020 | About:

To have a higher chance to unearth high-quality companies, Benjamin Graham, the founder of value investing, suggested picking stocks with a current ratio of more than 2 and higher working capital than long-term debt.

A current ratio of more than 2 indicates that a company has the means to handle its short-term obligations. The ratio is calculated by dividing the total current assets by the total current liabilities.

When working capital is higher than long-term debt, it indicates the business can generate more than it needs to pay long-term debt. The working capital is the difference between total current assets and total current liabilities.

Thus, investors may want to have a look at the following companies, as they possess the above criteria.

IDEX Corp

IDEX Corp (NYSE:IEX) is a Lake Forest, Illinois-based producer and distributor of fluid and flow metering technologies, medical technologies and fire and safety products.

The stock has a current ratio of 3.51, which is better than the industry median of 1.9.

IDEX Corp has trailing 12-month working capital of $903.56 million and long-term debt of $848.86 million as of the most recent full fiscal year.

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

The stock price traded at $152.59 per share at close on Friday for a market capitalization of $11.5 billion, a price-book ratio of 5.23 and a 52-week range of $104.56 to $178.14.

Sanderson Farms Inc

Sanderson Farms Inc (NASDAQ:SAFM) is a Laurel, Mississippi-based producer and distributor of fresh, frozen and processed chicken products in the U.S.

The stock has a current ratio of 3.04, which is better than the industry median of 1.57.

Sanderson Farms Inc has trailing 12-month working capital of $365.43 million and long-term debt of $55 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 traded at around $121.19 per share at close on Friday for a market capitalization of $2.7 billion, a price-book ratio of 1.94 and a 52-week range of $102.13 to $179.45.

Consolidated Water Co Ltd

Consolidated Water Co Ltd (NASDAQ:CWCO) is a Cayman Islands-based owner and operator of plants for the production and treatment of water to distribute in the Cayman Islands, the Bahamas, the U.S. and Indonesia.

The stock has a current ratio of 8.11, which is much better than the industry median of 1.05.

Consolidated Water has trailing 12-month working capital of $65.27 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 traded at $14.77 per share at close on Friday for a market capitalization of $223.24 million, a price-book ratio of 1.38 and a 52-week range of $12 to $18.83.

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 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

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