With a recession possibly on the horizon, investors may want to consider acquiring stocks with strong balance sheets. Of course, the underlying topic features much debate. According to a Reuters report, the Bank of Canada noted that the risk of recession shrunk. On the other hand, Morgan Stanley reported that U.S. recession risks were rising prior to the banking sector meltdown. It’s hard to imagine that bank runs and the failures of two major financial institutions assuage these concerns. Therefore, it’s well worth considering stocks with solid financials.
Further, an important component undergirding stocks with resilient balance sheets centers on participation. Here, we’re not talking about abandoning the equities market altogether. For full disclosure, that would be bad for my business. Rather, we’re simply considering adjusting portfolios to reflect certain realities. Each of the companies below have been screened for a minimum of 2:1 for quick and cash ratios. As well, none have long-term debt on their books. So, approach the coming storm with these stocks with strong balance sheets.
| FNV | Franco-Nevada | $154.99 |
| ISRG | Intuitive Surgical | $268.89 |
| MNST | Monster Beverage | $52.88 |
| POWI | Power Integrations | $78.03 |
| MPWR | Monolithic Power | $482.36 |
| GMED | Globus Medical | $59.03 |
| WIRE | Encore Wire | $167.55 |
Franco-Nevada (FNV)
A Canada-based, gold-focused royalty and streaming company, Franco-Nevada (NYSE:FNV) easily ranks among the most relevant enterprises right now. Again, with fears of a recession rising – along with concerns about monetary policy – fewer people trust the dollar. Therefore, precious metals and related investments start to make sense.
At the same time, the gold-mining industry tends to generate volatility for stakeholders. Here, the royalty and streaming businesses should lend some price predictability due to pre-arranged contractual terms. Just as importantly, Franco-Nevada represents one of the stocks with strong balance sheets.
Per data from Gurufocus, Franco-Nevada commands an equity-to-asset ratio of 0.97, ranked better than 87.14% of companies listed in the metals and mining industry. Also, its Altman Z-Score pings at a remarkable 85.82, reflecting extremely low bankruptcy risk. Finally, Wall Street analysts peg FNV as a consensus moderate buy. However, their average price target now is $156.91, implying less than a half-percent upside.
Intuitive Surgical (ISRG)
An American corporation that develops, manufactures, and markets robotic products designed to improve clinical outcomes of patients through minimally invasive surgery, Intuitive Surgical (NASDAQ:ISRG) represents a compelling idea among stocks with solid financials. Basically, Intuitive offers a relevant business now and it should be even more so in the future.
Fiscally, the company benefits from incredible strengths. First, its equity-to-asset ratio pings at 0.85 times, ranked better than 82.43% of firms listed in the medical devices and instruments industry. As well, its Altman Z-Score comes out to 31.81, indicating high stability and low bankruptcy risk. Also, it delivers on the operational front. Intuitive prints a three-year revenue growth rate of 11.2% and an impressive net margin of 21.25%. Also, its return on equity comes out to 11.29%, indicating a high-quality enterprise.
Lastly, covering analysts peg ISRG as a consensus moderate buy. Their average price target is $277.56, implying 4% upside potential.
Monster Beverage (MNST)
A popular beverage company, Monster Beverage (NASDAQ:MNST) courts attention for its energy drinks, thus competing with Red Bull. According to public data listed on Google Finance, as of 2020, Monster held nearly 39% of the $5.7 billion U.S. energy drink market. This represents the second-highest share after Red Bull.
What Monster Beverage does have over its rival is that it’s publicly traded. In addition, MNST ranks among the stocks with resilient balance sheets. As with Intuitive Surgical above, Monster commands an identical equity-to-asset ratio of 0.85. Against companies listed in the non-alcoholic beverages segment, MNST ranks better than nearly 90% of its peers. Also, Monster features a monstrously strong Altman Z-Score of 29.59.
In addition, it brings the green to the operational stats. Its three-year revenue growth rate stands at 15.5% while its net margin is 25.11%. In closing, analysts peg MNST as a consensus moderate buy. Their average price target comes out to $56.82, implying over 8% upside potential.
Power Integrations (POWI)
Based in San Jose, California, Power Integrations (NASDAQ:POWI) specializes in products geared toward the solar energy industry. As well, the company features applications for various other sectors, including LED drivers, gate drivers, and the automotive arena. Currently, Power carries a market capitalization of $4.51 billion. Since the start of this year, POWI gained 10% of its equity value.
Along with a relevant business, POWI benefits as one of the stocks with strong balance sheets. Here, the company’s equity-to-asset ratio pings at 0.9. Compared to other enterprises listed in the semiconductor industry, Power outpaces 92.71% of rivals. Also, it enjoys a blisteringly high Altman Z-Score of 35.92. Moreover, Power delivers on the operational front. Its three-year revenue growth rate comes out to 16.5%. Further, its EBITDA growth rate is 45.4% over the same period. Both stats rank in the underlying sector’s upper half.
Turning to Wall Street, analysts peg POWI as a consensus moderate buy. Their average price target stands at $90, implying over 14% upside potential.
Monolithic Power Systems (MPWR)
Founded in 1997, Monolithic Power Systems (NASDAQ:MPWR) provides power circuits for systems found in cloud computing, telecom infrastructures, automotive, industrial applications, and consumer applications. It’s a fairly large enterprise, carrying a market cap of $22.6 billion. Since the Jan. opener, MPWR stock gained 39% of equity value, no doubt aided by its underlying pertinence.
In keeping with the theme, Monolithic ranks among the stocks with strong balance sheets. Aside from carrying zero debt, Monolithic features an equity-to-asset ratio of 0.81. Compared to enterprises listed in the semiconductor industry, MPWR ranks better than 78.78% of its peers. Also, it benefits from a stratospheric Altman Z-Score of 37.55. Operationally, Monolithic offers an impressive canvas. Its three-year revenue growth rate pings at 39.3%. Its EBITDA growth rate during the same period comes out to 65.3%. And its net margin delivers the goods at 24.39%.
Looking to the Street, analysts peg MPWR as a unanimous strong buy. Their average price target stands at $553.45, implying 16% upside potential.
Globus Medical (GMED)
Based in Pennsylvania, Globus Medical (NYSE:GMED) focuses on the design, development, and commercialization of products that enable surgeons to promote healing in patients with musculoskeletal disorders. Currently, Globus commands a market cap of $5.92 billion. While exceptionally relevant, the company struggled this year. Since the Jan. opener, GMED fell more than 21%.
Nevertheless, Globus might appeal to some investors because it objectively ranks among stocks with solid financials. Primarily, it’s unencumbered with debt. As well, its equity-to-asset ratio hits 0.89, ranking better than 90.13% of companies in the medical devices and instruments industry. Finally regarding the balance sheet, its Altman Z-Score comes out to a robust 17.42. Operationally, it’s somewhat muted. Its three-year revenue growth rate is 9%, beating out 55.37% of rivals. However, the company’s net margin prints 18.59%, outpacing 84.81% of sector players.
Finally, analysts peg GMED as a consensus hold. However, their average price target stands at $67.67, implying nearly 18% upside potential.
Encore Wire (WIRE)
Headquartered in McKinney, Texas, Encore Wire (NASDAQ:WIRE) focuses on superior-quality wire and cable products. As well, Encore claims industry-leading delivery times and a customer service protocol that seeks total satisfaction. Whatever it’s doing, it’s working. Since the Jan. opener, WIRE gained 26% of its equity value. And over the trailing one-year period, it’s up slightly over 55%.
Fundamentally, not only does WIRE rank among the stocks with resilient balance sheets, Gurufocus mentions that it features five good signs with no bad ones. Among these attributes, Encore benefits from expanding operating margins. Moreover, it posts an Altman Z-Score of 14.3, reflecting fiscal resilience and low bankruptcy risk.
Operationally, Encore gets the job done with a three-year revenue growth rate of 36.7%. On the bottom line, its net margin comes out to 30.32%. Both stats impress relative to the underlying sector. Lastly, D.A. Davidson analyst Brent Thielman pegged WIRE as a buy. Also, the expert believes shares will hit $250, implying growth potential of almost 49%.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.