Top Five Fast-Growth 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, fast-growth stocks are in the spotlight. These are stocks of companies that are projected to increase revenue and profit by at least 12% in the coming year and rank near the top of all stocks rated by our proprietary quantitative model, which looks at over 60 factors.

In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. Please note that definitions of revenue vary by industry, and this screen does not make adjustments for acquisitions, which can materially affect posted results. Likewise, earnings-per-share growth may be affected by accounting charges, share repurchases and other one-time items.

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.

Flowserve (FLS Quote) engages in the development, manufacture and sale of precision-engineered flow equipments through three divisions: Flowserve Pump, Flow Control and Flow Solutions. The company operates worldwide, with 43% of its revenue coming from North America.

We have rated Flowserve a buy since January 2007. This is based on robust revenue growth, good cash flow from operations and expanding profit margins. Flowserve's revenue rose 19% year over year for the third quarter of 2007. The company also reported earnings per share of $1.10, compared with 49 cents in the third quarter of 2006. Furthermore, net operating cash flow has significantly increased to $106.8 million from the year-ago quarter, and the company has a gross profit margin of 36%, which we consider strong.

The recent surge in commodity costs is a challenge to the machinery industry. This could affect Flowserve's results in the future.

Fluor (FLR Quote) is a publicly owned engineering, procurement, construction and maintenance services company. With offices in more than 25 countries across six continents, clients come from a wide variety of industries, including chemicals, petrochemicals, government, health care, life sciences and telecommunications. Fluor's world headquarters are located in Texas.

Our buy rating for Fluor has not changed since January 2004. The company's strengths include strong revenue growth, solid stock-price performance and improvement in net income. The company reported record-breaking financial performance across all key metrics in fiscal 2007, according to management. For the fourth quarter of 2007, revenue rose 30% year over year. This growth appears to have helped boost earnings per share, which improved to $2.82 from 90 cents in the fourth quarter of 2006. Net income more than doubled for the fourth quarter to $259.5 million.

Fluor's very low debt-to-equity ratio of 0.14 implies successful management of debt levels. Powered by strong earnings growth and other factors, this stock has surged 56% over the past year.

Management expects Fluor to continue to deliver strong growth in 2008, as global demand for energy, infrastructure and basic materials creates new opportunities. The company continues to win new projects across the various markets that it serves. Management therefore raised its fiscal 2008 EPS guidance to a range of $5.10 to $5.50, from the previous range of $4.90 to $5.30 per share.

We feel that the company's strengths outweigh its relatively low profit margins and should allow the stock to continue to move higher despite its nice gain in the past year. Bear in mind, however, that performance could be affected by the cyclical nature of the markets that Fluor serves, along with any unexpected delays or difficulties in the execution of contracts.