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Alberto Abaterusso
Alberto Abaterusso
Articles (2618) 

A Trio of High-Return Businesses with Solid Balance Sheets

Their financial strength and profitability have received high ratings

February 25, 2021 | About:

Investors searching for value opportunities may want to have a look at the three stocks listed below, 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 them, suggesting that share prices are foreseen to gain significantly over the next months.

Abiomed Inc

The first stock that makes the cut is Abiomed Inc (NASDAQ:ABMD), a Danvers, Massachusetts-based manufacturer and distributor of medical devices that are used to treat the pumping function of the failing heart.

GuruFocus rated its financial strength 9 out of 10, driven by havin gno debt and by an Altman Z-Score of 55.01.

Furthermore, Abiomed Inc has a return on invested capital of 23.38%, which is far above the average cost of capital of 8.82%, indicating that the investment is yielding back a higher return than the cost to raise the needed capital.

GuruFocus rated its profitability 8 out of 10, driven by a return on capital (ROC) ratio of 88.08%. The company's ROC ratio ranks higher than 93% of the 703 companies that are operating in the medical devices and instruments industry.

The share price ($323.78 as of Feb. 24) has gained 111.29% over the past year for a market capitalization of $14.64 billion, a price-earnings ratio of 73.75 (versus the industry median of 35) and a price-book ratio of 11.73 (versus the industry median of 4.51).

The price-sales ratio is 18.16 (versus the industry median of 5.47) and the 52-week range is $119.01 to $387.40.

On Wall Street, as of February, the stock has a median recommendation rating of overweight and an average target price of $378 per share.

Graco Inc

The second stock that makes the cut is Graco Inc (NYSE:GGG), a Minneapolis, Minnesota-based global manufacturer of systems and equipment used to handle and diffuse fluid and powder materials.

GuruFocus rated its financial strength 8 out of 10, driven by an Altman Z-Score of 12.34 and a debt-to-Ebitda ratio of 0.48, which ranks higher than 80.2% of the 1,869 companies that operate in the industrial products industry.

The ROIC of 27.76% is higher than the WACC of 4.86%, suggesting that the company's investments are returning more than what it costs to raise the necessary funds.

GuruFocus rated the company's profitability 8 out of 10, driven by a return on capital (ROC) ratio of 55.07%, which ranks higher than nearly 94% of the 2,566 companies that are operating in the industrial products industry.

The share price ($69.84 as of Feb. 24) has climbed 30.27% over the past year for a market capitalization of $11.75 billion, a price-earnings ratio of 36.44 (versus the industry median of 25.89) and a price-book ratio of 9.39 (versus the industry median of 1.81).

The price-sales ratio is 7.25 (versus the industry median of 1.45) and the 52-week range is $38.43 to $76.98.

On Wall Street, as of February, the stock has a median recommendation rating of hold and an average target price of $79.50 per share.

Deckers Outdoor Corp

The third stock that makes the cut is Deckers Outdoor Corp (NYSE:DECK), a Goleta, California-based designer and seller of casual and high performing footwear and apparel.

GuruFocus rated its financial strength 8 out of 10, driven by a Piotroski F-score of 7 out of 9 and an Altman Z-Score of 9.52.

The ROIC of 43.03% is significantly above the WACC of 5.88%, which indicates that each investment made by the company is currently yielding more than what it is costing.

GuruFocus rated the company's profitability 8 out of 10, driven by a three-Year Ebitda growth rate of 101.6% (versus the industry median of -0.15%) and a three-year EPS without NRI growth rate of 276.7% (versus the industry median of -1.6%).

The share price ($331.48 as of Feb. 24) has climbed by 80.06% over the past year for a market capitalization of $9.31 billion, a price-earnings ratio of 25.71 (versus the industry median of 19.67) and a price-book ratio of 6.18 (versus the industry median of 1.02).

The price-sales ratio is 3.96 (versus the industry median of 0.79) and the 52-week range is $78.70 to $340.58.

On Wall Street, as of February, the stock has a median recommendation rating of buy with an average target price of $385.71 per share.

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 how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. 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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