Benjamin Graham, the father of value investing, recommended investors look 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 been able 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 substantially exceeds the long-term debt, it means the business should be able to honor its long-term debt 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 the above criteria.
DoorDash
The first stock to consider is DoorDash Inc. (DASH, Financial), a San Francisco-based platform for ordering and delivering food.
The stock has a current ratio of 4.14 versus the industry median of 2.61.
DoorDash has trailing 12-month working capital of about $4.1 billion and zero long-term debt as of the most recent fiscal year.
GuruFocus assigned a rating of 7 out of 10 to the company's financial strength.
The share price was $213.33 at close on Tuesday for a market capitalization of $72.64 billion and a 52-week range of $110.13 to $256.09.
Wall Street sell-side analysts issued a median recommendation rating of overweight and an average target price of about $212.44 per share for the stock.
Twitter.
The second stock to consider is Twitter Inc. (TWTR, Financial), a social media company headquartered in San Francisco.
The stock has a current ratio of 4.31, exceeding the industry median of 2.61.
Twitter has a trailing 12-month working capital of about $6.6 billion and long-term debt of $2.6 billion as of the most recent fiscal year.
GuruFocus assigned a rating of 5 out of 10 to the company's financial strength.
The stock closed around $66.11 on Tuesday for a market capitalization of $53.07 billion and a 52-week range of $38.93 to $80.75.
Wall Street sell-side analysts issued a median recommendation rating of hold and an average target price of $72.17 per share for the stock.
HubSpot
The third stock to consider is HubSpot Inc. (HUBS, Financial), a Cambridge, Massachusetts-based provider of cloud-based customer relationship management services.
The stock has a current ratio of 2.53, which is more compelling than the industry median of 2.01.
HubSpot has a trailing 12-month working capital of nearly $1.01 billion versus $471.10 million in long-term debt as of the most recent fiscal year.
GuruFocus assigned a rating of 5 out of 10 to the company's financial strength.
The stock closed at $790.95 per share on Tuesday for a market capitalization of $37.59 billion and a 52-week range of $283.87 to $817.33.
Wall Street sell-side analysts issued a median recommendation rating of overweight and an average target price of $807.62 per share for the stock.
UiPath
The fourth stock to consider is UiPath Inc. (PATH, Financial), which provides a range of robotic process automation solutions primarily in the U.S., Japan and Romania.
The stock has a current ratio of 5.76 versus the industry median of 2.01.
UiPath has a trailing 12-month working capital of about $369.3 million versus no long-term debt as of the most recent fiscal year.
GuruFocus assigned a rating of 7 out of 10 to the company's financial strength.
The stock traded around $51.72 at close on Tuesday for a market capitalization of $26.3 billion and a 52-week range of $47.2 to $90.
Wall Street sell-side analysts issued a median recommendation rating of overweight and an average target price of $70.80 per share for the stock.
