3 Top Quality Stocks for You

Alberto Abaterusso

Alphabet Inc tops the list

If you screen the market for stocks that have a current ratio higher than 2 and more working capital than long-term debt as Benjamin Graham, the father of value investing suggested, chances that your investments will be successful should increase significantly.

When the current ratio is higher than 2, the company has produced sufficient liquidity to pay back its short-term creditors. The ratio is calculated by dividing the total current assets by the total current liabilities.

When the working capital is substantially higher than the long-term debt, it indicates the business can most likely generate the cash needed to meet all of the long-term obligations. The working capital results from total current assets minus total current liabilities.

Thus, investors may want to consider the following stocks, as they possess the above criteria.

Alphabet Inc

The first stock that qualifies is Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG), the Mountain View, California-based tech conglomerate.

The stock has a current ratio of 3.41, which is more compelling than the industry median of 2.36.

Alphabet Inc. has a trailing 12-month working capital of about $107.36 billion and a long-term debt of about $3.96 billion as of the most recent fiscal year.

Alphabet Inc.’s common stock class A:

Alphabet Inc.’s common stock class C:

GuruFocus assigned a rating of 8 out of 10 for the company’s financial strength and a rating of 9 out of 10 for its profitability.

The price per share of common stock class A closed at $1,726.22, while the price per share of common stock class C closed at $1,731.01 on Friday, determining a market capitalization of approximately $1.17 trillion. The 52-week range is $1,008.87 to $1,843.83 per share of common stock class A and $1,013.54 to $1,847.2 per share of common stock class C. While the price-book ratio is 5.49.

Wall Street sell-side analysts recommend a buy recommendation rating for this stock and have established an average target price of about $1,942 per share of common stock class A, and of about $1,940 per share of common stock class C.

Facebook Inc

The second stock that qualifies is Facebook Inc. (NASDAQ:FB), the Menlo Park, California-based social media giant.

The stock has a current ratio of 5.51, which is more appealing than the industry median of 2.36.

Facebook has a trailing 12-month working capital of about $51.17 billion and no long-term debt as of the most recent fiscal year.

GuruFocus assigned a rating of 9 out of 10 for both the company’s financial strength and its profitability.

The stock closed at $276.4 on Friday for a market capitalization of $787.27 billion, a price-book ratio of 6.69 and a 52-week range of $137.1 to $304.67.

Wall Street sell-side analysts recommend a buy recommendation rating for this stock and have established an average target price of about $324.54 per share.

Advanced Micro Devices Inc

The third stock that qualifies is Advanced Micro Devices Inc. (NASDAQ:AMD), a Santa Clara, California-based global semiconductors manufacturer.

The stock has a current ratio of 2.28, which is almost in line with the industry median of 2.31.

Advanced Micro Devices has a trailing 12-month working capital of about $2.24 billion and long-term debt of about $486 million as of the most recent fiscal year.

GuruFocus assigned a rating of 8 out of 10 for the company’s financial strength and of 5 out of 10 for its profitability.

The stock closed at $95.92 on Friday for a market capitalization of $115.49 billion, a price-book ratio of 29.82 and a 52-week range of $36.75 to $97.98.

Wall Street recommends an overweight rating for this stock and has established an average target price of $93.13 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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