In today’s volatile markets, investors are constantly seeking ways to safeguard their portfolios while chasing meaningful returns. One time-tested strategy is to invest in companies that are cash-rich and carry minimal debt. Cash-rich businesses not only withstand economic downturns better but also have greater flexibility to invest, innovate, and reward shareholders.
However, not every cash-rich company is automatically a good investment. Investors need to be selective, considering several financial metrics beyond just the cash figure. This is where InvestingPro’s powerful screener “Cash is King” steps in, helping investors uncover high-quality opportunities in just a few clicks.
This screener doesn’t just filter for companies sitting on cash piles. It applies stringent quality checks — factoring in metrics like current ratio and return on assets to ensure only financially robust businesses make the cut.
What is the current ratio?
Simply put, the current ratio measures a company’s ability to pay off its short-term liabilities with its short-term assets. A ratio above 1 indicates that a company has more assets than liabilities, reflecting strong financial health. The “Cash is King” screener prioritizes companies with healthy current ratios, ensuring investors focus on businesses that can easily weather financial storms.
Another important metric considered is return on assets (ROA), which measures how efficiently a company is using its assets to generate profits. Higher ROA typically points to better management efficiency.
Take Just Dial (NSE:JUST) for example, a standout from the “Cash is King” screener.
- It boasts a current ratio of 8.2, signaling extremely strong liquidity.
- Its leveraged free cash flow margin stands at an impressive 20%, meaning it generates significant cash even after paying off its financial obligations.
- With a total debt to capital ratio of just 1.3%, it’s virtually debt-free.
- According to InvestingPro’s fair value, Just Dial offers a potential upside of 14.7% to INR 1,059.
- Even better, the average target price from 8 analysts covering the stock is 32.5% higher at INR 1,223.
For investors seeking solid businesses with real financial strength, this is the kind of opportunity that’s hard to ignore.
With InvestingPro currently offering discounts of up to 45%, there’s never been a better time to access elite tools like the “Cash is King” screener and uncover hidden gems. Don’t miss out — secure your edge today!
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