Rock Star Post

Shorts Screen

Screen of the Week 11/02/2010: Current Ratio

This week, I'm focusing on another ratio to help gauge a company's financial health: the Current Ratio. It's calculated by dividing current assets by current liabilities. The higher the ratio, the better, meaning the company has more liquid assets to meet its short-term obligations. A ratio of 2 or more (meaning a company has at least twice as many short-term assets than short-term liabilities) is generally considered good.

 

Presently, the average current ratio for stocks in the S&P 500 is 1.82. BTW – the Medical sector has the best current ratio with a median of 2.68 while Finance still has the worst at 0.96.

 

How to Use

Screening for this is quite easy to do. It's a ratio, so on any of our screeners, including the Research Wizard, you'd want to first go to Ratios. And then go to the Liquidity and Coverage section. From there, you'll find an item called Current Ratio. That's the one. As for what value to use, I prefer to compare a stock's Current Ratio to the median for its Industry.

 

And in this week's screen, we're doing just that. We'll also add in some other items to help us find sound companies with solid prospects for the future.

 

Screen Parameters

* Average Broker Rating = 1

(Only Strong Buys allowed.)

 

* Current Ratio > median for its respective X Industry

(Looking at the companies with the strongest liquid positions to meet their short-term financial obligations.)

 

* Current ratio > 2

(And at the very least, we want the companies to exceed the commonly held definition of good, which means greater than 2.)

 

* Projected 1 Yr. Growth Rate > median for its respective X Industry

(This means we're looking for the companies with the best growth rates within their groups.)

 

* Projected 1 Yr. Growth Rate > 0

(And I only want positive projected growth rates.)

 

* Price >= $5

 

* Volume >= 100,000

 

Here are 5 stocks that passed this week's screen:

• BKI - Buckeye Technologies Inc.
• BZ - Boise Inc.
• CISG - CNinsure Inc.
• IGTE - iGATE Corp.
• STRI -STR Holdings, Inc.

 

Start using this financial strength ratio in your own screening to help you find the stocks best able to prosper during these tough financial times. Put these ideas and others to the test today. Sign up now for a two week trial to the Research Wizard and start screening and backtesting your strategies before your next trade.

 

Get started with your free trial today.

 

Disclosure: Officers, directors and/or 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 that are mentioned in this material.

About the Author

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market-beating Zacks Strategic Investor service. For more information, visit http://www.zacks.com.

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It used to be a column on right side of screen, but not it is short but goes all the way across the middle of the screen. Too, my Yahoo web page is off the desktop to the right except for one small sliver that I can click on and drag back onto desktop. How can I put these back like they were? Thank you for any help with this.

Place your pointer at the very edge of the window, do it slowly until the pointer becomes two arrows facing east and west, now hold the clicker down and drag the page down to the width you want and release the clicker.

In Messenger, this only applies to the top window of the instant message window (so open that window first by "sending" an instant message, at least for sizing), but for regular pages, you can go on to this next step too.

Go to the top (or bottom) of the page and do the same thing, only this time the arrows will be facing north and south. Click and hold, now drag the window down until you have the height you want, release the clicker.

Now you have your window sized for your pleasure. You can do this to 95% of the windows you open, you'll soon learn which ones cannot be sized.

Good luck!