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Alberto Abaterusso
Alberto Abaterusso
Articles (2275) 

3 High Quality Stocks for the Value Investor

These businesses have solid financial conditions

June 25, 2020 | About:

Benjamin Graham, the father of value investing, recommended screening for stocks that have a current ratio of more than 2 and more working capital than long-term debt, as these measures indicate solid balance sheets.

These two metrics tell whether the company can generate enough financial resources to run the business and pay back both short-term and long-term lenders.

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

Thus, investors may want to consider the following stocks, as they represent companies that meet the above listed criteria.

MKS Instruments Inc

MKS Instruments Inc (NASDAQ:MKSI) is an Andover, Massachusetts-based provider of production process measurement, analyzing and controlling instruments and systems to the manufacturing industry.

The stock has a current ratio of 4.53, which appeals more than the industry median of 1.93.

MKS Instruments Inc has a trailing 12-month working capital of about $1.12 billion and long-term debt of $871.67 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 high rating of 8 out of 10 for its profitability.

The stock price closed at $112.83 per share on Wednesday for a market capitalization of $6.2 billion, a price-book ratio of 3.02 and a 52-week range of $66.87 to $122.30.

West Pharmaceutical Services Inc

West Pharmaceutical Services Inc (NYSE:WST) is an Exton, Pennsylvania-based manufacturer and seller of healthcare products in the U.S. and internationally.

The stock has a current ratio of 2.84, which is better than the industry median of 2.43.

West Pharmaceutical Services Inc has a trailing 12-month working capital of $717.1 million and long-term debt of $255 million as of the most recent full fiscal year.

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

The stock price closed at $216.51 per share on Wednesday for a market capitalization of $16.01 billion, a price-book ratio of 10.95 and a 52-week range of $109.88 to $221.96.

Dolby Laboratories Inc

Dolby Laboratories Inc (NYSE:DLB) is a San Francisco-based developer of audio and imaging technologies for the entertainment and communication services industries.

The stock has a current ratio of 4.75, which is more compelling than the industry median of 1.61.

Dolby Laboratories Inc has a trailing 12-month working capital of $1.07 billion and no 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 8 out of 10 for its profitability.

The stock price closed at $65.99 per share on Wednesday for a market capitalization of $6.85 billion, a price-book ratio of 2.87 and a 52-week range of $44.68 to $73.20.

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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