Stock Picks: Top Five Mid-Caps for Aug. 7

SPX has been rated a buy since June 2007 due to its robust revenue growth, solid stock price performance, impressive record of EPS growth and largely solid financial position. For the second quarter of fiscal 2008, revenue rose 28.8% year-over-year as a result of strong demand for the company's engineered products. EPS improved 37.1% over the prior year quarter, rising from $1.24 to $1.70. Net income increased 48.4%, rising from $63.9 million in the second quarter of fiscal 2007 to $94.8 million in the most recent quarter.

A relatively low debt-to-equity ratio indicates that the company has been somewhat successful in its efforts to manage debt levels. Additionally, SPX's stock price has surged 34.9% over the past year, powered by factors like its strong earnings growth of 37.1% over the same period.

Looking ahead, the company raised its EPS guidance to a range of $6.40 to $6.60 based on its second-quarter results and current trends. Bear in mind, however, that while the company's strengths outweigh any weaknesses in our opinion, SPX does show weak operating cash flow.

Gorman-Rupp (GRC Quote) designs, manufactures and sells pumps and related equipment for use in various liquid-handling applications, such as wells, wastewater, agricultural systems, fire protection and military uses. The company's pumps have a variety of uses, from pumping refined petroleum products for fueling aircraft and water for fire fighting to ice cube dispensing equipment and office copy machines.

Our buy rating Gorman-Rupp has not changed since November 2005. The company's strengths can be seen in multiple areas, such as its revenue and net income growth, largely solid financial position and impressive record of EPS growth. Revenue for the second quarter of fiscal 2008 rose 5.5% year-over-year. The company's second-quarter net income of $7.9 million represents a 20.8% increase from the $6.54 million reported one year ago. As a result, the company was able to report EPS of 47 cents, representing a 19.9% improvement over the 39 cents it earned in the second quarter of fiscal 2007.

Improved operating leverage on additional sales, a favorable product sales mix and a lower effective tax rate helped Gorman-Rupp achieve its record earnings results for the second quarter. Additionally, the company reported record net sales results, which resulted from continued increases in international sales. Finally, the company ended the quarter with no debt to speak of and a quick ratio of 2.63, which indicates that it has the ability to cover short-term cash needs.