Teva, Pegasystems: Top 5 Growth Stocks

TheStreet.com Ratings provides exclusive stock, ETF and mutual fund recommendations using proprietary tools. Our "safety first" approach aims to reduce risk while achieving total return performance.

BOSTON (TheStreet) -- These companies are projected to increase revenue and profit by at least 12% in the coming year. They also have "buy" ratings from our quantitative model, which considers more than 60 factors. They're ordered by their potential to appreciate, starting with the company with the best growth prospects.

Teva Pharmaceutical Industries(TEVA Quote) is an Israel-based drugmaker.

The numbers: Second-quarter net income dropped 2% to $521 million and earnings per share fell 11% to 58 cents, hurt by a higher share count. Revenue rose 20% to $3.4 billion. Its gross margin dropped from 58% to 54%, but its operating margin increased from 23% to 24%. A quick ratio of 0.9 indicates less-than-ideal liquidity. A debt-to-equity ratio of 0.4 reflects conservative leverage.

The stock: Teva is up 20% this year, beating the Dow Jones Industrial Average and S&P 500 Index. The stock trades at a price-to-earnings ratio of 53, a premium to the market and pharmaceutical peers. The shares offer a 1.2% dividend yield.

Pegasystems(PEGA Quote) sells software that automates business processes.

The numbers: Second-quarter profit surged 294% to $11 million, or 30 cents a share, as revenue rose 25% to $64 million. Its gross margin advanced from 59% to 66% and its operating margin grew from 5% to 18%. Pegasystems has an outstanding liquidity position, evident in its quick ratio of 3.9, and holds zero debt.

The stock: Pegasystems has rocketed 156% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 47, a premium to the market and application software makers. The stock's dividend yield is less than 1%.