3 Stocks With Ironclad Balance Sheets for Long-Term Stability

Key Points

• While the income statement provides a look at sales and margins, the balance sheet helps assess a company's crucial liquidity and solvency positions.
• Metrics like net debt, the current ratio, and return on assets are valuable in examining balance sheet quality.
• These three stocks hold some of the most impressive balance sheets in the entire market.

Although sometimes overshadowed by the all-important income statement, the balance sheet can offer essential insights into a company's financial health. It revolves around the balance between a company’s assets and liabilities. It helps assess factors important to overall financial health, like liquidity and solvency. 

Liquidity refers to a company’s ability to cover its short-term liabilities with readily available assets. This includes being able to pay suppliers in cash each month. Solvency refers to a company’s ability to meet its long-term obligations. It looks at a firm’s ability to repay long-term loans or bonds.

The balance sheet also provides insight into how a company might fare in a period of low demand. A recession or an industry-specific downturn could cause this. Companies with ample cash have a chest of savings they can dip into if conditions deteriorate.

The balance sheet can also signal a company’s ability to make a game-changing strategic acquisition. Doing so is much easier for companies with lots of cash and relatively low debt. Below is a look at three stocks with some of the most rock-solid balance sheets on the market.

NVIDIA: Chip Cash Cow With Dropping Debt

Unsurprisingly, NVIDIA NASDAQ: NVDA finds itself with one of the best balance sheets in the tech sector and the market. The chip company’s net debt, which measures cash and short-term investments minus total debt, is -$33 billion. This means that NVIDIA could pay off all of its debt and still have $33 billion in cash and short-term investments remaining. 

This indicates that the firm is extremely solvent. In 2024, its balance of cash and short-term investments increased by around $17 billion.

Meanwhile, its debt decreased by nearly $800 million. This shows a significant increase in the firm's ability to make a large strategic investment if it chooses.

Turning to liquidity, the firm boasts an impressive current ratio of 4.4x. The current ratio divides current assets by current liabilities. Current assets are cash or other assets expected to turn into cash in one year.

Current liabilities are those that the company needs to pay within a year. For NVIDIA, this ratio shows that its cash plus assets, which it plans to convert into cash in the next year, are 4.4 times greater than its expected payouts. This shows the company’s excellent liquidity position.

Remove Ads

Arista Networks: Putting Its Bundle of Assets to Efficient Use

Next up is another tech name tied to economic tailwinds similar to NVIDIA, Arista Networks NYSE: ANET. While NVIDIA provides the advanced computing chips to handle AI workloads, Arista provides technology in data centers that routes data between these advanced chips. This allows them to communicate efficiently.

This has led to a massive uptick in demand for Arista’s products over the last two years. As a result, its cash and short-term investments have increased from $3 billion at the end of 2022 to $8.3 billion at the end of 2024.

Compared to its $99 billion market capitalization, the firm’s debt is barely a drop in the bucket at $60 million. It also has a current ratio of 4.4x. These factors show the firm's impressive liquidity and solvency positions.

Another area where Arista shines is in its ability to effectively use its available assets to generate profits. The Return on Assets (ROA) metric divides net income by total assets. Arista’s ROA over the last 12 months is over 15%.

This means that for every dollar of assets on its balance sheet, it generated $0.15 of profit. This figure is one of the highest in the U.S. tech sector.

Regeneron: Leading Big Pharma in Net Debt Positioning

Moving away from tech, Regeneron Pharmaceuticals NASDAQ: REGN also enjoys a very durable balance sheet. The company has around $3 billion in debt, but for Big Pharma stocks, this is very low.

Big Pharma companies often carry substantial debt as they frequently buy smaller firms with promising new medicines. 

Regeneron’s debt is the second lowest among the top 11 largest U.S. pharmaceutical and biotechnology firms. It ranks well below the $36 billion average debt among these 11 stocks.

When looking at net debt, it has the best position among this group at -$15 billion. This shows its strong solvency and ability to make acquisitions going forward. The company also has the best current ratio among the group by far at 4.7x.

The next closest company, Vertex Pharmaceuticals NASDAQ: VRTX, has a current ratio of 2.7x. This shows the firm’s strong liquidity position compared to its competition.