A Trio of High Return Businesses on Robust Balance Sheets




  • In Business
  • 2020-11-15 21:16:06Z
  • By External Contributor
A Trio of High Return Businesses on Robust Balance Sheets
A Trio of High Return Businesses on Robust Balance Sheets  

- By Alberto Abaterusso

Value investors may want to consider the three stocks listed below, as they represent equities in companies with high productive operating activities and robust financial conditions based on GuruFocus profitability and financial strength ratings of at least 7 out of 10.

Furthermore, sell-side analysts on Wall Street have issued positive recommendation ratings for each of them, enhancing expectations for high-performing stocks.

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Facebook

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

GuruFocus rated its financial strength 9 out of 10, driven by an equity-to-asset ratio of 0.8 (versus the industry median of 0.65), a Piotroski F-Score of 6 (out of 9) and an Altman Z-Score of 18.78. These indicators suggest the existence of robust financial conditions, implying nearly a zero risk for bankruptcy within the next two years.

Over the past 13 years, the equity-to-asset ratio ranged between a low of 0.76 and a high of 0.91 with a median of 0.88. The Altman Z-Score ranged between a low of 2.25 and a high of 45.22, with a median of 31.73, while the Piotroski F-Score ranged between a low of 4 and a high of 8.

Facebook boasts a return on invested capital of 34.37%, which exceeds the weighted average cost of capital of 9.35%. This indicates the company's investments are returning more than what it costs to raise the necessary funds.

GuruFocus rated its profitability 9 out of 10, driven by an operating margin of 36.41% (versus the industry median of 3.2%), which is derived from an operating income of $28.754 billion for the trailing 12 months ended Sept. 30 on total revenue of $78.98 billion.

Facebook's operating margin ranks higher than 92% of the 520 companies that are operating in the interactive media industry.

The share price ($276.95 as of Nov. 13) has climbed 42% over the past year for a market capitalization of $788.83 billion, a price-earnings ratio of 31.54 (versus the industry median of 31.08) and a price-book ratio of 6.7 (versus the industry median of 3.78).

The price-sales ratio is 10.1 (versus the industry median of 3.83) and the 52-week range is $137.1 to $304.67.

On Wall Street, the stock has 17 strong buys, 24 buys, one hold, one underperform and one sell recommendation rating for an average target price of $314 per share.

Texas Instruments

The second stock that qualifies is American semiconductor manufacturer Texas Instruments Inc. (NASDAQ:TXN).

GuruFocus rated its financial strength 7 out of 10, driven by a Piotroski F-score of 4 and an Altman Z-Score of 14.13, which indicate the business lies on stable financial conditions, implying an extremely low risk of failure.

During the past 13 years, the Altman Z-Score of Texas Instruments ranged between a low of 8.32 and a high of 16.95, with a median of 8.32. The Piotroski F-Score ranged between a low of 1 and a high of 9, with a median of 7.

The ROIC of 44.27% is surpassing the WACC of 7.19%, suggesting the investment is generating a higher return than the cost the company endures for raising the capital needed for that investment.

GuruFocus rated Texas Instruments' profitability 8 out of 10, driven by a return on capital of 125.69% (versus the industry median of 86.8%). It ranks higher than 94% of the 827 companies that are operating in the semiconductors industry.

The share price ($156.65 as of Nov. 13) has risen 32.75% over the past year for a market capitalization of $143.80 billion, a price-earnings ratio of 29.61 (versus the industry median of 28.72) and a price-book ratio of 17.27 (versus the industry median of 2.24).

The price-sales ratio is 10.68 (versus the industry median of 2.21) and the 52-week range is $93.09 to $164.63.

On Wall Street, the stock has six strong buys, eight buys, 17 hold recommendation ratings and one underperform recommendation rating for an average target price of $158.11 per share.

Intuit

The third stock that qualifies is Intuit Inc. (NASDAQ:INTU), a Mountain View, California-based business and financial software company.

GuruFocus rated its financial strength 7 out of 10, driven by a Piotroski F-score of 5 and an Altman Z-Score of 12.88. These indicators suggest the company has a stable financial situation, lowering the risk for bankruptcy within the next two years down near to zero.

Over the past 13 years, the Altman Z-Score ranged between a low of 3.9 and a high of 21.61, with a median of 12.88. The Piotroski F-Score ranged between a low of 4 and a high of 9, with a median of 6.

The ROIC of 31.61% surpasses the WACC of 6.76%, which indicates the investment returns to the company a higher profit than what it costs to fund that investment.

GuruFocus rated its profitability 9 out of 10, driven by a return on equity of 36.16% (versus the industry median of 4.9%), which ranks higher than 97% of the 2,060 companies that are operating in the software industry.

The share price ($356.95 as of Nov. 13) has gained 34.17% over the past year for a market capitalization of $93.45 billion, a price-earnings ratio of 51.58 (versus the industry median of 30.40) and a price-book ratio of 18.3 (versus the industry median of 3.46).

The price-sales ratio is 12.27 (versus the industry median of 2.7) and the 52-week range is $187.68 to $377.15.

On Wall Street, the stock has six strong buys, three buys, 11 holds and two underperform recommendation ratings for an average target price of $361.94 per share.

Disclosure: I have no positions in any securities mentioned.

Read more here:

  • A Trio of Non-Cyclical Stocks to Consider

  • 3 Stocks Trading Below the Peter Lynch Fair Value

  • 3 High-Return Stock Picks



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