If in search of value, investors may want to have a look at the following three stocks, as they represent equities in companies with high profitability and robust financial conditions. In fact, these stocks have GuruFocus profitability and financial strength ratings of at least 7 out of 10.
Additionally, Wall Street sell-side analysts have recommended positive ratings for each of them, indicating that share prices are expected to move higher over the next months.
Garmin Ltd
The first stock that makes the cut is Garmin Ltd (GRMN, Financial), a Schaffhausen, Switzerland-based manufacturer of scientific and technical instruments.
GuruFocus rated its financial strength 8 out of 10, driven by a cash-debt ratio of 28.31 (versus the industry median of 1.29) and an Altman Z-Score of 11.56, both indicating the existence of robust financial conditions.
Furthermore, Garmin has a return on invested capital of 26.39%, which is significantly higher than the weighted average cost of capital of 5.16%. This trend suggests that the company's investments are returning more than what it costs to raise the necessary financial resources.
GuruFocus rated its profitability 7 out of 10, driven by a return on capital (ROC) ratio of 70.32%. The company's ROC ratio ranks higher than nearly 84% of the 2,3380 companies that are operating in the hardware industry. The industry has a median of 9.06%.
The share price ($117.47 as of Jan. 28) has climbed 18.27% over the past year for a market capitalization of $22.46 billion, a price-earnings ratio of 22.08 (versus the industry median of 25.71) and a price-book ratio of 4.4 (versus the industry median of 1.9).
The price-sales ratio is 5.72 (versus the industry median of 1.4) and the 52-week range is $61.04 to $125.00.
On Wall Street, as of January, the stock has a median recommendation rating of hold and an average target price of $119.57 per share.
West Pharmaceutical Services Inc
The second stock that makes the cut is West Pharmaceutical Services Inc (WST, Financial), an Exton, Pennsylvania-based manufacturer and seller of containment and delivery systems for injectable drugs and other healthcare products in the U.S. and internationally.
GuruFocus rated its financial strength 8 out of 10, driven by an interest coverage ratio of 46.46 as of the most recent quarter. It ranks higher than 62.54% of the 331 companies that operate in the medical devices and instruments industry. Also, the Piotroski F-score is 6 out of 9 and the Altman Z-Score is 17.94. These indicators suggest the company has a stable financial situation.
The ROIC of 18.64% is substantially higher than the WACC of 7.08%, indicating that the investment is yielding back a higher return than the cost to raise the needed capital.
GuruFocus rated West Pharmaceutical Services' profitability 8 out of 10, driven by an operating margin of 18.7%. It ranks higher than 80.51% of the 662 companies that are operating in the medical devices and instruments industry. The industry has a median of 0.68%.
The share price ($298.92 as of Jan. 28) has risen 89.25% over the past year for a market capitalization of $22.10 billion, a price-earnings ratio of 72.38 (versus the industry median of 34.73) and a price-book ratio of 12.85 (versus the industry median of 4.47).
The price-sales ratio is 11.1 (versus the industry median of 5.46) and the 52-week range is $124.53 to $312.12.
On Wall Street, as of January, the stock has a median recommendation rating of overweight and an average target price of $298 per share.
Teradyne Inc
The third stock that makes the cut is Teradyne Inc (TER, Financial), a North Reading, Massachusetts-based manufacturer of automatic test equipment for use in several industries worldwide, including automotive, industrial, communications and semiconductors.
GuruFocus rated its financial strength 8 out of 10, driven by a Piotroski F-score of 6 out of 9 and an Altman Z-Score of 10.61. These ratios suggest that the financial conditions of the company are stable.
The ROIC of 43.15% is exceeding the WACC of 9.26%, which indicates that the investment is currently returning more than what it is costing.
GuruFocus rated Teradyne's profitability 8 out of 10, driven by a return on capital (ROC) ratio of 116.67% (versus the industry median of 10.28%) and a three-Year Ebitda growth rate of 122.4% (versus the industry median of 7.7%).
The share price ($119.94 as of Jan. 28) has risen by 74.20% over the past year for a market capitalization of $19.92 billion, a price-earnings ratio of 30.14 (versus the industry median of 33.8) and a price-book ratio of 9.99 (versus the industry median of 2.75).
The price-sales ratio is 7.23 (versus the industry median of 2.67) and the 52-week range is $42.87 to $143.40.
On Wall Street, as of January, the stock has a median recommendation rating of overweight with an average target price of $138.71 per share.
Disclosure: I have no positions in any securities mentioned.
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