To increase the likelihood of discovering high-quality companies, Benjamin Graham, the father of value investing, recommended screening for stocks with a current ratio of more than 2 and higher working capital than long-term debt.
A current ratio over 2 indicates a company has sufficient liquidity to pay its short-term creditors. The ratio is calculated by dividing the total current assets by the total current liabilities.
When the working capital exceeds the long-term debt by a wide margin, it means the business can most likely generate more than what is required to meet all of the long-term obligations. The working capital is the difference between total current assets and total current liabilities.
Thus, investors may want to consider the following stocks since they meet these criteria.
Columbia Sportswear
Columbia Sportswear Co. (COLM, Financial) is a Portland, Oregon-based apparel and footwear manufacturer.
The stock has a current ratio of 2.99, which is more appealing than the industry median of 1.59.
Columbia Sportswear has a trailing 12-month working capital of about $1.24 billion and no long-term debt as of the most recent fiscal year.
GuruFocus assigned a high rating of 8 out of 10 for the company's financial strength and profitability.
The stock was trading at $79 per share at close on Wednesday for a market capitalization of $5.2 billion, a price-book ratio of 3.15 and a 52-week range of $51.82 to $102.88.
Cooper Tire & Rubber
Cooper Tire & Rubber Co. (CTB, Financial) is a Findlay, Ohio-based manufcaturer and marketer of tires.
The stock has a current ratio of 2.09, which is more compelling than the industry median of 1.5.
Cooper Tire & Rubber has a trailing 12-month working capital of $848.91 million and long-term debt of $309.15 million as of the most recent 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 was trading at $34.72 per share at close on Wednesday for a market capitalization of $1.76 billion, a price-book ratio of 1.49 and a 52-week range of $13.82 to $37.21.
Brady
Brady Corp. (BRC, Financial) is a Milwaukee-based manufacturer and provider of identification solutions and workplace safety products for the identification and safeguard of premises, products and people.
The stock has a current ratio of 2.33, which is more appealing than the industry median of 1.65.
Brady has a trailing 12-month working capital of $331.34 million and no long-term debt as of the most recent fiscal year.
GuruFocus assigned a high rating of 8 out of 10 for the company's financial strength and a positive rating of 6 out of 10 for its profitability.
The stock was trading at $50.20 per share at close on Wednesday for a market capitalization of $2.58 billion, a price-book ratio of 3.16 and a 52-week range of $33 to $59.11.
Disclosure: I have no positions in any securities mentioned.
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