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, it means there is more than enough liquidity to pay back 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 is likely well prepared to satisfy any financial obligations arising because of long-term debt. 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 and have positive ratings on Wall Street.
Pinterest Inc.
The first stock to consider is Pinterest Inc. (PINS, Financial), a San Francisco, California-based provider of a visual discovery social media platform.
The stock has a current ratio of 14.22 versus the industry median of 2.53.
Pinterest Inc. has trailing 12-month working capital of approximately $2.981 billion and no long-term debt as of the most recent quarter ended March 30, 2022.
GuruFocus assigned a rating of 9 out of 10 to the company's financial strength.
The share price was $18.42 as of early trading on Wednesday for a market capitalization of $12.22 billion and a 52-week range of $16.14 to $81.77.
Wall Street sell-side analysts issued a median recommendation rating of hold and an average target price of $26.24 per share for the stock.
NIO Inc.
The second stock to consider is NIO Inc. (NIO, Financial), a Shanghai, China-based manufacturer of electric vehicles in China, Hong Kong, the United Kingdom and Germany.
The stock has a current ratio of 2.02, exceeding the industry median of 1.57.
NIO Inc. has trailing 12-month working capital of about $5.11 billion and long-term debt of $1.75 billion as of the most recent quarter ended March 30, 2022.
GuruFocus assigned a rating of 5 out of 10 to the company's financial strength.
The stock traded around $22.66 as of early trading on Wednesday for a market capitalization of $37.85 billion and a 52-week range of $11.67 to $55.13.
Wall Street sell-side analysts issued a median recommendation rating of buy and an average target price of $34.75 per share for the stock.
XPeng Inc.
The third stock to consider is XPeng Inc. (XPEV, Financial), a Guangzhou, China-based manufacturer and marketer of smart electric vehicles (EVs).
The stock has a current ratio of 2.29, which is more compelling than the industry median of 1.57.
XPeng Inc. has trailing 12-month working capital of $4.09 billion versus $356 million in long-term debt as of the most recent quarter ended March 30, 2022.
GuruFocus assigned a rating of 7 out of 10 to the company's financial strength.
The stock traded at $30.09 per share as of early trading on Wednesday for a market capitalization of approximately $25.62 billion and a 52-week range of $18.01 to $56.45.
Wall Street sell-side analysts issued a median recommendation rating of buy and an average target price of approximately $38 per share for the stock.
STMicroelectronics NV
The fourth stock to consider is STMicroelectronics NV (STM, Financial), a Swiss multinational producer of semiconductors.
The stock has a current ratio of 2.60, which is slightly more compelling than the industry median of 2.34.
STMicroelectronics NV has trailing 12-month working capital of $4.91 billion versus $2.41 billion in long-term debt as of the most recent quarter ended March 30, 2022.
GuruFocus assigned a rating of 8 out of 10 to the company's financial strength.
The stock traded at $33.78 per share as of early trading on Wednesday for a market capitalization of $30.71 billion and a 52-week range of $32.59 to $52.15.
Wall Street sell-side analysts issued a median recommendation rating of overweight and an average target price of approximately $55.08 per share for the stock.
