Yahoo Finance A Trio of Stocks With Solid Balance Sheets for the Value Investor
- By Alberto Abaterusso
Benjamin Graham, the pioneer of value investing, suggested to look for stocks that have a current ratio of more than 2 and more working capital than long-term debt.
When the current ratio is higher than 2, the company has managed to produce sufficient liquidity to refund its short-term creditors. The ratio is calculated as total current assets divided by total current liabilities.
When the working capital exceeds the long-term debt substantially, it means that the business will likely be able to keep up with its long-term debt obligations. The working capital is the difference between total current assets and total current liabilities.
Thus, investors could be interested in the following stocks, as they meet the above criteria.
Kazia Therapeutics Ltd
The first stock that makes the cut is Kazia Therapeutics Ltd (NASDAQ:KZIA), a Sydney, Australia-based biotechnology developer of treatments for various forms of cancer.
The stock has a current ratio of 7.57, which is more compelling than the industry median of 5.08.
Kazia Therapeutics has trailing 12-month working capital of about $3.85 million and no long-term debt as of the most recent fiscal year.
GuruFocus assigned a rating of 6 out of 10 for the company's financial strength.
The share price traded at $10.45 at close on Wednesday for a market capitalization of $132.30 million and a 52-week range of $2.50 to $15.85.
Wall Street sell-side analysts recommend a median rating of buy and an average target price of about $17.2 per share for the stock.
Leap Therapeutics Inc
The second stock that makes the cut is Leap Therapeutics Inc (NASDAQ:LPTX), a Cambridge, Massachusetts-based biopharmaceutical developer of treatments for esophagogastric, hepatobiliary, gynecologic and prostate cancers.
The stock has a current ratio of 7.09, which is more appealing than the industry median of 5.08.
Leap Therapeutics has trailing 12-month working capital of about $44.9 million and no long-term debt as of the most recent fiscal year.
GuruFocus assigned a rating of 5 out of 10 for the company's financial strength.
The stock traded at $1.65 at close on Wednesday for a market capitalization of $98.46 million and a 52-week range of $1.43 to $3.24.
Wall Street sell-side analysts recommend a median rating of buy and an average target price of $5.30 per share for the stock.
Charles & Colvard Ltd
The third stock that makes the cut is Charles & Colvard Ltd (NASDAQ:CTHR), a Morrisville, North Carolina-based global manufacturer of moissanite jewels and finished jewelries.
The stock has a current ratio of 5.57, which is more appealing than the industry median of 1.49.
Charles & Colvard has trailing 12-month working capital of $14.42 million and long-term debt of $770,000 as of the most recent fiscal year.
GuruFocus assigned a rating of 7 out of 10 for the company's financial strength.
The stock closed at $3.37 on Wednesday for a market capitalization of $98.41 million and a 52-week range of $0.63 to $3.66.
One sell-side analyst on Wall Street recommends a rating of buy with a target price of $2.70 per share for the stock.
Disclosure: I have no positions in any securities mentioned.
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This article first appeared on GuruFocus.
