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.
If the current ratio is higher than 2, it means there is more than enough liquidity to repay short-term creditors. The ratio is calculated as total current assets divided by total current liabilities.
When the working capital substantially exceeds the amount of long-term debt, it means the business is likely well prepared to satisfy any financial obligations arising because of the 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.
Teradyne
The first stock to consider 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. In 2015, the company entered the industrial automation market, selling collaborative and autonomous robots for factory applications.
Teradyne serves multiple end markets and geographies, but semiconductor testing is its most significant business segment, accounting for 71% of its revenue in 2021. Teradyne serves vertically integrated, fabless and foundry chip manufacturers.
The stock has a current ratio of 2.85 versus the industry median of 2.25.
Teradyne has working capital of approximately $1.47 billion and long-term debt of $64.8 million as of the quarter ended June 30.
GuruFocus assigned a rating of 9 out of 10 to the company's financial strength.
The share price was $81.19 as of early trading on Tuesday for a market capitalization of $12.80 billion and a 52-week range of $75.01 to $168.91.
Wall Street sell-side analysts issued a median recommendation rating of overweight and an average target price of $111.62 per share for the stock.
Vanguard Group Inc. is the company's largest shareholder with 11.53% of outstanding shares. BlackRock Inc. is second with 8.41% and FMR LLC is third with 6.27%.
BeiGene
The second stock to consider is BeiGene Ltd. (BGNE, Financial), a Beijing-based developer of molecularly targeted and immuno-oncology drugs for the treatment of several forms of cancer. Its geographic segments are China, the U.S. and the rest of the world.
The stock has a current ratio of 4.54, which is slightly less compelling than the industry median of 5.
BeiGene has approximately $4.95 billion in working capital as of the quarter ended June 30 and $185.2 million in long-term debt.
GuruFocus assigned a rating of 7 out of 10 to the company's financial strength.
The stock was around $145.34 as of early trading on Tuesday for a market capitalization of $14.33 billion and a 52-week range of $118.18 to $392.30.
Wall Street sell-side analysts issued a median recommendation rating of buy and an average target price of $250.39 per share for the stock.
Among the company's top fund holders, Baker Bros. Advisors LP has the largest position with 11.24% of outstanding shares. Capital International Investors follows in second with 6.55%, while HHLR Advisors Ltd. is third with 5.27%.
Agnico Eagle Mines
The third stock to consider is Agnico Eagle Mines Ltd. (AEM, Financial), a Toronto-based miner of precious metal properties in Canada, Mexico and Finland. The company also produces some base metals such as lead, zinc and copper, but is primarily a gold miner. Other mining and exploration activities are located throughout Latin America and the U.S.
The company is targeting production between 3.2 million and 3.4 million of payable ounces of gold in 2022 with total cash costs per ounce and all-in sustaining costs per ounce on track to reach the higher frontiers of $775 and $1,050 respectively amid continued inflationary pressures. Agnico Eagle intends to confine its mineral activities to countries with friendly mining legislation, where it aims to increase throughput in the future.
The stock has a current ratio of 2.58, which is a little bit less compelling than the industry median of 2.99.
Agnico Eagle Mines’ working capital was $1.56 billion as of the quarter ended June 30, against $1.24 billion in long-term debt.
GuruFocus assigned a rating of 7 out of 10 to the company's financial strength.
The stock traded at $45.39 per share as of early trading on Tuesday for a market capitalization of approximately $20.34 billion and a 52-week range of $36.85 to $67.14.
Wall Street sell-side analysts issued a median recommendation rating of buy and an average target price of approximately $64.50 per share for the stock.
Among the company's top fund holders, Van Eck Associates Corp. has the largest position with 4.41% of outstanding shares. GQG Partners LLC is second with 3.83% and the VanEck Gold Miners ETF is third with 3.57%.
On Holding
The fourth stock to consider is On Holding AG (ONON, Financial), a Zurich, Switzerland-based developer and seller of athletic footwear, apparel and accessories worldwide. The company offers its products through independent retailers and distributors as well as online channels and in stores.
The stock has a current ratio of 4.49, which is more compelling than the industry median of 1.58.
On Holding's working capital was $863.3 million as of the quarter ended June 30. It also had $181.7 million in long-term debt.
GuruFocus assigned a rating of 7 out of 10 to the company's financial strength.
The stock traded at $17.61 per share as of early trading on Tuesday for a market capitalization of approximately $5.55 billion and a 52-week range of $15.90 to $55.87.
Wall Street sell-side analysts issued a median recommendation rating of overweight and an average target price of approximately $27.96 per share for the stock.
Among the company's top fund holders, FMR LLC has the largest position with 8.90% of outstanding shares. T Rowe Price Associates Inc. is second with 2.90% and Macquarie Group Ltd. is third with 2.64%.
