Top Five All-Around Value Stocks

Each business day, 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 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 (LLL Quote - Cramer on LLL - Stock Picks) provides a variety of communications, intelligence, surveillance, and reconnaissance-related services, primarily in the U.S. Customers include the Department of Defense, the Department of Homeland Security, various other U.S. government departments and agencies, allied foreign government ministries of defense, and commercial customers.

The buy rating on this stock is based primarily on expected benefits from a higher defense budget, an impressive bottom line performance in fourth-quarter 2007 and strong fundamentals. L-3 Communications recorded 19.5% growth in net income for the fourth quarter of 2007 vs. the year-ago period, fueled by robust top-line growth, operating margin expansion and essentially flat interest expense. Because the company is ranked among the top ten largest federal contractors, it is well positioned to benefit from current government spending on defense and homeland security. The company could also see an increased demand for its baggage-screening and surveillance systems due to higher security measures at airports.

Looking forward, management raised guidance for the first quarter of 2008 to be in the range of $6.48 to $6.62 per share, up from an earlier view of earnings per share of $6.41 to $6.55. This boost was based mainly on the company's healthy backlog position and a favorable industry outlook. It is important, however, to keep in mind that the company is heavily dependent on government spending, so any change in current trends or loss of key contracts could adversely affect the stock.

AT&T (T Quote - Cramer on T - Stock Picks) provides communication services and products in the U.S. and 240 other countries. The company has been rated buy since March 2006 due to its revenue and earnings growth, expanding profit margins and large subscriber base.

AT&T has recently made several strategic acquisitions. The merger with BellSouth in 2006 helped the company produce an impressive 61.8% increase in its fourth-quarter 2007 earnings. The company has also acquired Interwise, to accelerate the delivery of unified communications, and Dobson Communications Corporation, to enhance wireless coverage.

An improving bottom line and strong financial position also help support the buy rating on this stock. Net income for the fourth quarter of 2007 rose to $3.14 billion, or $0.51 per share, compared to $1.94 billion, or $0.50 per share, a year ago.

Looking ahead to 2008, AT&T expects its revenue to grow by mid-single digits and its adjusted earnings per share to grow by double digits. Risks to the rating and the future performance of this stock include intense competition from wireline and cable operators, merger-related challenges, a lower liquidity position, and a decline in return on equity. These factors could restrict the company's growth prospects in coming quarters.

« Previous Page

1 2 3

Next Page »