Top 3 Industrials Stocks That Are Ticking Portfolio Bombs

Creating a portfolio with favorable liquidity stocks is likely to work in favor of investors seeking healthy returns. Liquidity measures a company’s capability to meet short-term debt obligations. Stocks with high liquidity levels have always been in demand, owing to their potential to provide maximum returns.

Investors can consider adding stocks like American Superconductor Corporation AMSC, Frontdoor, Inc. FTDR, Sezzle Inc. SEZL and Vimeo, Inc. VMEO to their portfolios to boost returns.

However, one should be careful when investing in a stock with a high liquidity level, as it may also indicate that the company is failing to utilize its assets efficiently.

Apart from sufficient cash in hand, investors might also consider a company’s capital deployment abilities before investing in its stock. A healthy company with favorable liquidity may prove to be a profitable pick for one’s portfolio.

Measures to Identify Liquid Stocks

Current Ratio: It measures current assets relative to current liabilities. The ratio gauges a company’s potential to meet short- and long-term debt obligations. A current ratio — the working capital ratio — below 1 indicates that the company has more liabilities than assets. A high current ratio does not always suggest that the company is in good financial shape. It may also indicate that the firm failed to utilize its assets significantly. Hence, a range of 1-3 is considered ideal.

Quick Ratio: Unlike the current ratio, the quick ratio — the “acid-test ratio” or “quick assets ratio” — indicates a company’s ability to pay short-term obligations. It considers inventory, excluding current assets relative to current liabilities. A quick ratio of more than 1 is desirable, like the current ratio.

Cash Ratio: This is the most conservative ratio among the three, considering cash and cash equivalents and invested funds relative to current liabilities. It measures a company’s ability to meet existing debt obligations using the most liquid assets. Though a cash ratio of more than 1 may suggest sound financials, a higher number may indicate inefficiency in cash utilization.

A ratio greater than 1 is always desirable but may not always represent a company’s financial condition.

Screening Parameters

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.

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 five.

Here are four of the five stocks that qualified the screen:

American Superconductor Corporation is a provider of megawatt-scale power resiliency solutions. It develops and sells a wide range of products and solutions based on power electronic systems and high-temperature superconductor wires that improve the efficiency, reliability and quality of electricity during its generation, transmission, distribution and usage. It operates under two segments namely Grid and Wind.

In the last reported quarter, revenues came in at $54.5 million, up 60.3% year over year, driven by the acquisition of NWL and higher shipments of new energy power systems and electrical control system shipments. AMSC had $200 million in 12-month backlog and $300 million in total backlog.

Continued momentum across semiconductors, renewables, mining and metals and military end-markets bodes well. For the third quarter, AMSC expects revenues in the range of $55 million to $60 million.

The Zacks Consensus Estimate for fiscal 2024 earnings is pegged at 50 cents per share, up 61.3% in the past 30 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 328.2%, on average.

Frontdoor is the parent company of home service plan brands consisting of American Home Shield, HSA, Landmark and OneGuard. The company's customizable home service plans help customers protect and maintain their homes from costly and unplanned breakdowns of essential home systems and appliances.

In the last reported quarter, revenues came in at $540 million, up 3% year over year. The uptick was driven by a 4% increase in price, which was partly offset by a 1% decline from reduced volume. Further, the number of first-year Direct-to-Consumer home warranties was 271,000, up 3% sequentially. Gross margin expanded 550 basis points to 57% for the third quarter of 2024. The expansion was mainly driven by higher price and a shift to higher service fees.

It also concluded a $400 million share repurchase authorization in August 2024 and initiated a new 3-year, $650 million buyback authorization in September 2024.

The Zacks Consensus Estimate for 2024 earnings is pegged at $3.14 cents per share, up 12.5% in the past 30 days. FTDR has a Growth Score of B and a trailing four-quarter earnings surprise of 269%, on average.

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 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 $6.71 per share, unchanged in the past 60 days. The company has a Growth Score of A.

Vimeo provides video software solutions. The company's platform enables any professional, team and organization to unlock the power of video to create, collaborate and communicate. It has a more than 300-million strong user base. In the last reported quarter, revenues came in at $105 million, slightly down from $106 million reported in the prior-year quarter. Subscribers were up 26%, while average revenue per user was up 11% year over year.

The Zacks Consensus Estimate for 2024 earnings is pegged at earnings 14 cents per share, suggesting an improvement of 75% in the past 60 days. VMEO has a Growth Score of B.

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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.

Disclosure: Performance information for Zacks’ portfolios and strategies is available at: https://www.zacks.com/performance.

Zacks Investment Research

Graham (GHM) came out with quarterly earnings of $0.31 per share, beating the Zacks Consensus Estimate of $0.18 per share. This compares to earnings of $0.04 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 72.22%. A quarter ago, it was expected that this maker of vacuum and heat-transfer equipment would post earnings of $0.18 per share when it actually produced earnings of $0.33, delivering a surprise of 83.33%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Graham, which belongs to the Zacks Manufacturing - General Industrial industry, posted revenues of $53.56 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 6.07%. This compares to year-ago revenues of $45.08 million. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Graham shares have added about 76% since the beginning of the year versus the S&P 500's gain of 25.2%.

What's Next for Graham?

While Graham has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Graham: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.21 on $52 million in revenues for the coming quarter and $0.95 on $207.45 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Manufacturing - General Industrial is currently in the bottom 44% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

One other stock from the same industry, Broadwind Energy, Inc. (BWEN), is yet to report results for the quarter ended September 2024. The results are expected to be released on November 13.

This company is expected to post quarterly loss of $0.05 per share in its upcoming report, which represents a year-over-year change of -125%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Broadwind Energy, Inc.'s revenues are expected to be $36.85 million, down 35.5% from the year-ago quarter.

Zacks Investment Research

Manitex (MNTX) came out with quarterly earnings of $0.09 per share, beating the Zacks Consensus Estimate of $0.05 per share. This compares to earnings of $0.14 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 80%. A quarter ago, it was expected that this maker of forklifts, cranes and other lifting vehicles would post earnings of $0.08 per share when it actually produced earnings of $0.11, delivering a surprise of 37.50%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Manitex, which belongs to the Zacks Manufacturing - General Industrial industry, posted revenues of $66.54 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 4.90%. This compares to year-ago revenues of $71.33 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Manitex shares have lost about 34.8% since the beginning of the year versus the S&P 500's gain of 24.3%.

What's Next for Manitex?

While Manitex has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Manitex: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.08 on $75.47 million in revenues for the coming quarter and $0.33 on $295.02 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Manufacturing - General Industrial is currently in the bottom 44% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the same industry, Graham (GHM), has yet to report results for the quarter ended September 2024. The results are expected to be released on November 8.

This maker of vacuum and heat-transfer equipment is expected to post quarterly earnings of $0.18 per share in its upcoming report, which represents a year-over-year change of +350%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Graham's revenues are expected to be $50.5 million, up 12% from the year-ago quarter.

Zacks Investment Research

The Computer and Technology group has plenty of great stocks, but investors should always be looking for companies that are outperforming their peers. American Superconductor (AMSC) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? Let's take a closer look at the stock's year-to-date performance to find out.

American Superconductor is one of 619 companies in the Computer and Technology group. The Computer and Technology group currently sits at #3 within the Zacks Sector Rank. The Zacks Sector Rank considers 16 different sector groups. The average Zacks Rank of the individual stocks within the groups is measured, and the sectors are listed from best to worst.

The Zacks Rank is a proven system that emphasizes earnings estimates and estimate revisions, highlighting a variety of stocks that are displaying the right characteristics to beat the market over the next one to three months. American Superconductor is currently sporting a Zacks Rank of #1 (Strong Buy).

The Zacks Consensus Estimate for AMSC's full-year earnings has moved 500% higher within the past quarter. This means that analyst sentiment is stronger and the stock's earnings outlook is improving.

According to our latest data, AMSC has moved about 142.7% on a year-to-date basis. Meanwhile, the Computer and Technology sector has returned an average of 24.4% on a year-to-date basis. This shows that American Superconductor is outperforming its peers so far this year.

Another stock in the Computer and Technology sector, Broadcom Inc. (AVGO), has outperformed the sector so far this year. The stock's year-to-date return is 51%.

For Broadcom Inc. the consensus EPS estimate for the current year has increased 5% over the past three months. The stock currently has a Zacks Rank #2 (Buy).

Breaking things down more, American Superconductor is a member of the Electronics - Miscellaneous Components industry, which includes 28 individual companies and currently sits at #72 in the Zacks Industry Rank. This group has gained an average of 7.3% so far this year, so AMSC is performing better in this area.

In contrast, Broadcom Inc. falls under the Electronics - Semiconductors industry. Currently, this industry has 44 stocks and is ranked #143. Since the beginning of the year, the industry has moved +34.5%.

American Superconductor and Broadcom Inc. could continue their solid performance, so investors interested in Computer and Technology stocks should continue to pay close attention to these stocks.

Zacks Investment Research

When it comes to short-term investing or trading, they say "the trend is your friend." And there's no denying that this is the most profitable strategy. But making sure of the sustainability of a trend to profit from it is easier said than done.

Often, the direction of a stock's price movement reverses quickly after taking a position in it, making investors incur a short-term capital loss. So, it's important to ensure that there are enough factors -- such as sound fundamentals, positive earnings estimate revisions, etc. -- that could keep the momentum in the stock going.

Our "Recent Price Strength" screen, which is created on a unique short-term trading strategy, could be pretty useful in this regard. This predefined screen makes it really easy to shortlist the stocks that have enough fundamental strength to maintain their recent uptrend. Also, the screen passes only the stocks that are trading in the upper portion of their 52-week high-low range, which is usually an indicator of bullishness.

There are several stocks that passed through the screen and

American Superconductor

(AMSC) is one of them. Here are the key reasons why this stock is a solid choice for "trend" investing.

A solid price increase over a period of 12 weeks reflects investors' continued willingness to pay more for the potential upside in a stock. AMSC is quite a good fit in this regard, gaining 42.8% over this period.

However, it's not enough to look at the price change for around three months, as it doesn't reflect any trend reversal that might have happened in a shorter time frame. It's important for a potential winner to maintain the price trend. A price increase of 19.1% over the past four weeks ensures that the trend is still in place for the stock of this wind turbine component maker.

Moreover, AMSC is currently trading at 84% of its 52-week High-Low Range, hinting that it can be on the verge of a breakout.

Looking at the fundamentals, the stock currently carries a Zacks Rank #1 (Strong Buy), which means it is in the top 5% of more than the 4,000 stocks that we rank based on trends in earnings estimate revisions and EPS surprises -- the key factors that impact a stock's near-term price movements.

The Zacks Rank stock-rating system, which uses four factors related to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here

Another factor that confirms the company's fundamental strength is its Average Broker Recommendation of #1 (Strong Buy). This indicates that the brokerage community is highly optimistic about the stock's near-term price performance.

So, the price trend in AMSC may not reverse anytime soon.

In addition to AMSC, there are several other stocks that currently pass through our "Recent Price Strength" screen. You may consider investing in them and start looking for the newest stocks that fit these criteria.

This is not the only screen that could help you find your next winning stock pick. Based on your personal investing style, you may choose from over 45 Zacks Premium Screens that are strategically created to beat the market.

However, keep in mind that the key to a successful stock-picking strategy is to ensure that it produced profitable results in the past. You could easily do that with the help of the Zacks Research Wizard. In addition to allowing you to backtest the effectiveness of your strategy, the program comes loaded with some of our most successful stock-picking strategies.

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Zacks Investment Research