Liquidity measures a company’s capability to meet short-term debt obligations. Investors seeking strong portfolio returns should benefit from adding stocks with sound liquidity, which encourages business growth. Stocks with high liquidity levels have always been in demand, owing to their potential to provide maximum returns.
Investors may want to consider adding four top-ranked stocks — Argan, Inc. AGX, Ciena Corporation CIEN, HubSpot HUBS and Semtech Corporation SMTC — to their portfolios to boost returns.
However, it is important to exercise caution. While high liquidity can indicate that a company is efficiently managing its short-term obligations, it may also suggest underutilization of resources. In some cases, companies with excess liquidity may not be deploying their assets effectively, which could limit growth potential.
Hence, one may consider a company’s efficiency level in addition to its liquidity while identifying prospective winners. A balanced assessment of both liquidity and efficiency can help identify truly promising investment opportunities.
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, 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 it 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 that of their industry can be considered efficient.
We added our proprietary Growth 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: A higher asset utilization than the industry average indicates a company’s efficiency.
Zacks Rank equal to #1 (Strong Buy): 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 12.
Here are four of the 12 stocks that qualified the screen:
Argan offers comprehensive construction and related services to the power industry through its operations at Gemma Power Systems and Atlantic Projects.
Driven by favorable project timings in the Power segment, AGX reported first-quarter fiscal 2027 revenues of $291 million, up 50% year over year. It ended the quarter with a backlog of $2.8 billion. The Power segment remained the top contributor, accounting for 78% of total revenues.
Increasing demand for energy infrastructure, driven by electrification trends, data center expansion, electric vehicles and grid reliability needs, is creating strong opportunities, positioning Argan well for long-term growth. The company expects to add a “handful” of new projects over the next 10-18 months and believes it can execute 10-12 concurrent jobs.
The Zacks Consensus Estimate for AGX’s fiscal 2027 earnings stands at $12.60 per share, unchanged over the past seven days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 40.49%, on average.
Ciena, headquartered in Hanover, MD, is a leading provider of optical networking equipment, software and services. Fiscal second-quarter 2026 revenues rose 39.5% year over year to $1.57 billion, driven by cloud demand and higher adoption of optical networking solutions.
Networking Platforms remained the largest contributor, generating $1.27 billion in revenues and representing 81.1% of total sales. Within the segment, Optical Networking revenues increased to $1.10 billion from $773.6 million a year ago, while Routing and Switching revenues advanced to $174.2 million from $92.7 million.
For fiscal third-quarter 2026, management expects revenues of $1.625 billion (+/- $50 million). Adjusted gross margin is projected at 45% (+/-50 bps), while adjusted operating margin is expected between 19% and 20%.
The Zacks Consensus Estimate for CIEN’s fiscal 2026 earnings is pegged at $6.52 per share, unchanged in the past seven days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 19.45%, on average.
HubSpot is an AI-driven customer relationship management (CRM) platform. The integration of advanced AI tools and state-of-the-art features, such as AI assistance, AI agents, AI insights, and ChatSpot, across its entire product suite and customer platform is delivering greater value to customers. HubSpot added more than 10,800 net new customers during the first quarter, bringing the total customer count to 299,458.
The company is gaining from upmarket momentum as customers consolidate their go-to-market stack. Another major driver is multi-hub adoption and platform consolidation, followed by pricing tailwinds. For 2026, management estimates revenues between $3.7 billion and $3.708 billion, up 18% year over year on a reported basis.
The software-as-a-service vendor’s first-quarter 2026 revenues improved to $881 million, up 23% from the year-ago quarter. Subscription revenues increased 23% year over year to $862.3 million.
The Zacks Consensus Estimate for HUBS’ 2026 earnings stands at $13.11 per share, unchanged in the past seven days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 4.97%, on average.
Semtech Corporation is a semiconductor company that builds high-performance chips for AI data center networking, IoT connectivity and intelligent connected devices.
As for any semiconductor company right now, the most powerful growth driver for Semtech is its data center business. This business delivered record revenues of $71.6 million in the first quarter of fiscal 2027, growing 39% year over year. Rising hyperscaler demand for high-speed connectivity solutions, particularly in 800G linear pluggable optics and next-generation 1.6T optical and copper interconnects, bodes well.
The traction seen in LoRa (long range) wireless technology is another catalyst. LoRa revenues grew 14% in the first quarter, and the company expects it to reach an all-time high with more than 15% sequential growth in the fiscal second quarter.
The Zacks Consensus Estimate for SMTC’s fiscal 2027 earnings stands at $2.66 per share, unchanged in the past seven days. The company has a Growth Score of B and a trailing four-quarter earnings surprise of 6.81%, on average.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
