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3 Financially Solid Stock Picks for Value Investors

These companies meet Benjamin Graham's key criteria

Author's Avatar
Alberto Abaterusso
Jul 07, 2021

Summary

  • Deckers Outdoor, Legend Biotech and Rogers all have strong balance sheets.
  • They appear to be strong enough to prevent any solvency issues in the short, medium and long term.
  • Wall Street recommends these stocks.
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Benjamin Graham, the pioneer of value investing, recommended searching for stocks that have a current ratio higher than 2 and more working capital than long-term debt.

When the current ratio is higher than 2, the company has managed to produce more than enough liquidity to pay back its short-term creditors. The ratio is calculated as total current assets divided by total current liabilities.

When the working capital surpasses the long-term debt substantially, it means the business will likely be able to keep on honoring its long-term debt obligations. The working capital is the difference between total current assets and total current liabilities.

Thus, investors could be interested in the following stocks since they meet the above criteria.

Deckers Outdoor

The first stock that makes the cut is Deckers Outdoor Corp. (

DECK, Financial), a Goleta, California-based designer and seller of casual and high-performing footwear and apparel.

The stock has a current ratio of 3.52 versus the industry median of 1.7.

Deckers Outdoor has trailing 12-month working capital of about $1.18 billion and no long-term debt as of the most recent fiscal year.

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GuruFocus assigned a rating of 8 out of 10 to the company's financial strength.

The share price was at $391.475 in early trading on Wednesday for a market capitalization of $10.79 billion and a 52-week range of $184.21 to $396.23.

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Wall Street sell-side analysts issued a median recommendation rating of buy and an average target price of about $419.92 per share for the stock.

Legend Biotech

The second stock that meets the criteria is Legend Biotech Corp. (

LEGN, Financial). Based in Somerset, New Jersey, the company is a clinical-stage biopharmaceutical developer of novel treatments for multiple myeloma, Hodgkin’s lymphoma, acute myeloid leukemia and T cell lymphoma in North America and internationally.

The stock has a current ratio of 3.26, versus the industry median of 5.91.

Legend Biotech has trailing 12-month working capital of about $431.69 million and no long-term debt as of the most recent fiscal year.

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GuruFocus assigned a rating of 6 out of 10 to the company's financial strength.

The stock was trading around $39.6 on Wednesday for a market capitalization of $5.72 billion and a 52-week range of $23.41to $42.74.

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Wall Street sell-side analysts issued a median recommendation rating of buy and an average target price of $52.75 per share for the stock.

Rogers

The third stock that qualifies is Rogers Corp. (

ROG, Financial). Based in Chandler, Arizona, the company manufactures circuit and engineered materials as well as ceramic substrate materials, busbars and cooling solutions that are used in various applications in wireless infrastructure, aerospace and defense, connected devices, automotive and wired infrastructure.

The stock has a current ratio of 3.9, which is more appealing than the industry median of 1.96.

Rogers has trailing 12-month working capital of $362.67 million and long-term debt of $25 million as of the most recent fiscal year.

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GuruFocus assigned a rating of 8 out of 10 to the company's financial strength.

The stock traded around $198.59 per share on Wednesday for a market capitalization of $3.72 billion and a 52-week range of $95.69 to $206.13.

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Wall Street sell-side analysts issued a median recommendation rating of buy and an average target price of $248.40 per share for the stock.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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