Top Five All-Around Value Stocks

Our buy rating for General Dynamics has not changed since July 2003. This rating is based on strengths such as revenue growth, an impressive EPS improvement and compelling growth in net income. Revenue rose 11% year over year for the first quarter of fiscal 2008. This growth appears to have boosted EPS, which improved 33%. Net income also increased 32% to $572 million. General Dynamics' debt-to-equity ratio is very low at 0.24, implying successful management of debt levels.

While the stock is trading higher than it was a year ago, it should go without saying that even the best stocks can fall in an overall down market. We believe that the company's strengths outweigh weak operating cash flow and potential difficulty in covering short-term cash needs.

Hewlett-Packard HPQ provides products, technologies, solutions and services to individual consumers and businesses worldwide. Offerings include enterprise storage and servers, personal computing, multivendor services, imaging and printing. H-P's Personal Systems segment produces, among other products, commercial and consumer PCs based predominantly on the Windows operating system. These products use Intel INTC and AMD AMD processors.

Our buy rating for Hewlett-Packard has not changed since November 2004 and is based on robust top-line and bottom-line growth, margin expansion and attractive returns. Total revenue for the first quarter of fiscal 2008 grew 14% year over year, aided by surging laptop sales and continued demand for printer ink. Cost control measures and lower component costs helped the company to improve gross profit margin and operating margin 91 basis points and 140 basis points, respectively, from the year-earlier quarter. Gross profit margin was reported at 26%, while operating margin was 9.2%. H-P also reported improved returns, with return on assets increasing to 8.9% from 8% and return on equity rising to 21% from 17%.

For fiscal 2008, Hewlett-Packard raised its guidance based on anticipated cost reductions and gain in its market share. The company expects revenue to range between $27.7 billion and $27.9 billion for the second quarter of fiscal 2008. However, despite rising revenue and earnings, the company faces challenges from rising debt levels and stiff competition. Additionally, exposure to emerging markets is forcing the company to lower its prices in order to protect market share.

Our quantitative rating is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks.

However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could impact the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe a rating alone cannot tell the whole story, and should be part of an investor's overall research.