Top 5 Mid-Cap Stocks

NEW YORK (TheStreet) -- The five mid-cap stocks rated highest by TheStreet Ratings have single-digit upside potential - at best -- based on median analyst targets, but all have managed strong sales growth over the past year.

The following 5 companies have market capitalizations of between $500 million and $10 billion and are rated A+, which is equivalent to a strong buy:

5. Casey's General Stores

Company Profile

Casey's General Stores (CASY) of Ankeny, Iowa, operates over 1,500 convenience stores in the Midwest. The stock is in-play, as Canadian-based Alimentation Couche-Tard of Montreal raised an earlier unsolicited tender offer of $36 a share to $38.50 or approximately $2 billion on Sep. 1. Casey's board of directors rejected an unsolicited bid from Couche-Tard in March and has recommended shareholders reject the subsequent tender offers.

Casey has also said it "remains in discussions with 7-Eleven, Inc." regarding a friendly offer. 7-Eleven offered $40 a share for the company on September 2, and Casey's board has said it firmly believes that Casey's value substantially exceeds $40 per share

In a September 8 note released before it was made public that Casey was negotiating with 7-Eleven, BMO Capital Markets analyst Karen Short speculated that Speedway (Marathon Oil (MRO) subsidiary Speedway SuperAmerica LLC) might be a good strategic fit with Casey's because of a similar marketing strategy and Speedway's Midwest footprint.

Income Statement

The company's fiscal year ends on April 30. For the three-months ended July 31, earnings were $37.2 million, or 73 cents a share, compared to $21.9 million, or 43 cents a share, during the previous three-month period and $44.2 million, or 87 cents a share, a year earlier. Earnings for the company's first quarter of fiscal 2011 were hurt by $6.2 million in legal and advisory fees related to the ongoing battle with Couche-Tard.

Second-quarter revenue was $1.36 billion, increasing 15% year-over-year.

Balance Sheet

Casey's General Stores has a low ratio of debt to capital of 0.16.

Stock Ratios

Shares were trading for 20 times earnings, which is above the P/E for domestic, except for Whole Foods (WFMI) which trades for 28 times earnings.

Analyst Ratings

Karen Short has a Market Perform or neutral rating on the shares, with a $46 price target that "does take into consideration the take-out potential," adding the target is "not rich for a company with a 100%-owned real estate portfolio and strong balance sheet." Casey's is a classic risk-arbitrage play for investors counting on a bidder stepping up to offer a serious premium for the shares.

According to Thomson Reuters, five of eight analysts covering Casey's General Stores rate the shares a buy, while the other three recommend investors hold the shares.

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