Liquidity of a stock is an important parameter that investors should consider while adding stocks to their investment portfolio. Liquidity primarily determines a company’s capability to meet debt obligations by converting assets into liquid cash and equivalents. These stocks are always in demand owing to their potential to provide maximum returns.
However, one should be alert enough before investing in such stocks. While a high liquidity level may imply that the company is clearing its dues faster than peers, it may also indicate that it is failing to use its assets efficiently.
A ratio greater than 1 is always desirable but may not always represent a company’s financial condition.
To pick the best of the lot, we have added asset utilization — a widely used measure of a company’s efficiency — as one of the screening criteria. Asset utilization is the ratio of total sales in the past 12 months to the last four-quarter average of total assets. Though this ratio varies across industries, companies with a ratio higher than their industries can be considered efficient.
We added our proprietary Growth Style Score to the screen to ensure these liquid and efficient stocks have solid growth potential.
Current Ratio, Quick Ratio, and Cash Ratio between 1 and 3: While liquidity ratios greater than 1 are desirable, significantly high ratios may indicate inefficiency.
Asset utilization is more significant than the industry average: Higher asset utilization than the industry average indicates a company’s efficiency.
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Zacks Rank equal to #1: Only Strong Buy-rated stocks can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.
Growth Score less than or equal to B: Back-tested results show that stocks with a Growth Score of A or B handily beat other stocks when combined with a Zacks Rank #1 or 2 (Buy).
These criteria have narrowed the universe of more than 7,700 stocks to only nine.
Here are four of the nine stocks that qualified the screen:
Sezzle is a fintech company that operates a digital payment platform, mainly across the United States and Canada. This platform offers customers interest-free installment plans at online stores and certain in-store locations. In the last reported quarter, revenues jumped 71.3% year over year due to an increasing subscriber base. As of Sept. 30, 2024, SEZL had 529,000 active subscribers across the Anywhere and Premium platforms.
Management raised the top and bottom-line outlook for 2024 owing to strong growth and the inclusion of the newly launched banking program with WebBank. It expects total revenue growth of 55% compared with 35-40% mentioned earlier. Earnings per share are expected to be $12.05 compared with $9.25 stated earlier. The Zacks Consensus Estimate for 2024 earnings is pegged at $9.85 per share, up 46.8% in the past 60 days. The company has a Growth Score of B.
Ubiquiti, along with its subsidiaries, offers a comprehensive portfolio of networking products and solutions for service providers and enterprises. Its service-provider product platforms offer carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems and routing. Enterprise product platforms provide wireless local area network infrastructure, video surveillance products and machine-to-machine communication components.
Ubiquiti reported strong first-quarter fiscal 2025 results, with the bottom and top lines surpassing the respective Zacks Consensus Estimate. The company is benefiting from solid growth in the Enterprise Technology segment, backed by healthy demand in North America, Europe and the Middle East and Africa regions. Its strategy of consistent dividend payments while maintaining a sustainable payout ratio is positive. Solid growth in free cash flow underscores efficient resource management and implies that the company is well-positioned to invest in growth initiatives and pay off debt.
The Zacks Consensus Estimate for fiscal 2025 earnings is pegged at $7.30 per share, up 1.8% in the past 60 days. The company has a Growth Score of A.
Oddity is a consumer tech-focused company headquartered in New York City. It helps to build digital-first brands to take on the offline beauty and wellness industries. ODD’s AI-powered online platform utilizes data science to identify consumer requirements (in terms of beauty and wellness products) and develop new solutions. The company has 50 million users.
Steady momentum across both IL MAKIAGE and SpoiledChild brands is driving top-line expansion. In the last reported quarter, net revenues of $119 million increased 26% year over year. Driven by strong year-to-date performance and sustained high repeat rates, the company revised its outlook upward for 2024. ODD now expects net revenues between $642 million and $644 million for 2024 (previous projection: $633-$640 million).
The Zacks Consensus Estimate for ODD’s 2024 bottom line is pegged at earnings of $1.87 per share, suggesting an improvement from $1.31 reported in the previous year. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 33.5%, on average.
DXP Enterprises is one of the foremost products and service distributors that adds value and total cost savings solutions to industrial clients across Canada, Mexico, the United States and Dubai.
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The company’s performance is gaining from moderating inflationary pressure and varied spending across end markets. In the last reported quarter, revenues improved 12.8% year over year to $472.9 million. Healthy execution of the growth strategy and synergies from acquisition are other tailwinds. In November 2024, DXPE acquired two companies — Burt Gurney & Associates and MaxVac Inc. These acquisitions were funded utilizing cash on the balance sheet. These companies offer value-added products and services to the water and vacuum pump verticals.
The Zacks Consensus Estimate for DXPE’s 2024 bottom line is pegged at earnings of $4.07 per share, suggesting an improvement of 14.3% in the past 60 days. The company has a Growth Score of A.
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Disclosure: Officers, directors and employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options mentioned in this material.
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DXP Enterprises, Inc. (DXPE) : Free Stock Analysis Report
Ubiquiti Inc. (UI) : Free Stock Analysis Report
ODDITY Tech Ltd. (ODD) : Free Stock Analysis Report
Sezzle Inc. (SEZL) : Free Stock Analysis Report
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