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I ran a screen on Research Wizard with the following parameters:

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  • Current ratio greater than or equal to 3: This will select companies that are 3 times more capable to cover short-term obligations.
  • Debt-to-equity ratio less than or equal to 1%: This captures stocks that have a low degree of financial leverage.
  • ROA and ROE greater than or equal to 15%: This picks stocks that are generating over 15% earnings by utilizing their equity base and asset base separately.
  • Operating margin greater than or equal to 20%: This identifies stocks that have the flexibility to reinvest their pure profits, as their costs are under control.
  • Zacks Rank less than or equal to 2: This ascertains stocks that have been witnessing solid earnings estimate revisions and are poised to outperform. (See the performance of Zacks’ portfolios and strategies here: About Zacks Performance).

Here are the top 3 among the 5 stocks that I could extract from the screen:

Alexion Pharmaceuticals (ALXN): Headquartered in Cheshire, Connecticut, this Zacks Rank #1 biopharmaceutical company is my top pick.

  • Current ratio = 3.75
    Debt-to-equity ratio = 0.03%
  • Trailing 12-month ROA = 18.47%
  • Trailing 12-month ROE = 24.25%
  • Operating margin (Trailing 12 months) = 35.32%

Skyworks Solutions (SWKS): This provider of analog semiconductors is my second choice. The company is headquartered in Woburn, Massachusetts and currently carries a Zacks Rank #2.

  • Current ratio = 7.12
    Debt-to-equity ratio = 0.02%
  • Trailing 12-month ROA = 16.15%
  • Trailing 12-month ROE = 17.88%
  • Operating margin (Trailing 12 months) = 20.16%

Oracle (ORCL): This well-known database and application software maker is my third choice. This Redwood City, California-based tech database giant currently holds a Zacks Rank #2.

  • Current ratio = 3.38
    Debt-to-equity ratio = 0.51%
  • Trailing 12-month ROA = 15.16%
  • Trailing 12-month ROE = 28.52%
  • Operating margin (Trailing 12 months) = 33.61%

Don’t Miss Good Entry Points

None of my screening parameters is dependent on the price performance of these stocks. So you should add them to your watch list first and wait for good entry points, as these fundamentals will not change any time soon. In any case, these stocks will be better performers given their funding self sufficiency.

However, take action before these strengths are reflected in the stock prices. Don’t wait too long!

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Disclosure: The author has no positions in any stocks mentioned.

AUXILIUM PHARMA (AUXL): Free Stock Analysis Report

ORACLE CORP (ORCL): Free Stock Analysis Report

SKYWORKS SOLUTN (SWKS): Free Stock Analysis Report

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