Top Five All-Around Value Stocks
Each weekday, TheStreet.com Ratings compiles a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists in the Ratings section of our Web site.
This list, updated daily, is based on data from the close of the previous trading session. Today, all-around-value stocks are in the spotlight. These are stocks of companies that meet a number of criteria, including annual revenue of more than $500 million, lower-than-average valuations such as a price-to-sales ratio of less than 2 and leverage that is less than 49% of total capital.
In addition, they must rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 60 factors. The stocks must also be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. They are ordered by their potential to appreciate.
Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.L-3 Communications Holdings (LLL), a military-equipment company, has been rated a buy since October 2005. It recently reported that its third-quarter net income rose 21% over a year ago. Revenue increased by 11.1% during the same period, outpacing the industry average of 8.5%. L-3's earnings per share grew by 19.1% and the company's stable EPS growth over the past year indicates that it has sound management over its earnings and share float. Its net operating cash flow rose 24.41% to $324.10 million during the third quarter compared with the same period last year. L-3 Communications said it expects 2008 earnings to be within the range of Wall Street's expectations. While the company's stock price rose by 36.16% in the 12 months prior to Nov. 1, it should continue to move higher. Johnson Controls (JCI), which makes building heating and cooling systems, has been rated a buy since August 2005, based on its impressive growth in revenue and net income. The company recently reported that its fiscal fourth-quarter profit increased 29.4% to $466 million, or 77 cents a share, while revenue climbed 11% to $9.01 billion, led by strong growth in the building efficiency and the power solutions segments. For 2007, net income increased 21.8% to $1.25 billion, or $2.09 a share. Revenue rose 7.4% to $34.62 billion for the year. Johnson Controls' performance largely depends on its ability to drive higher sales from its building efficiency and automotive experience segments. A sluggish housing sector and rising fuel prices hurting the automobile industry might restrict revenue growth in both segments.
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