Here's How 10 Mid-Cap Stock 'Darlings' Performed in October
The most popular stocks held by mid-cap funds underperformed in October -- the second consecutive month these widely held stocks lagged the Russell Midcap Index, according to a report out by Credit Suisse. Below is a list of how the top 10 most-held stocks by mid-cap institutional investors performed last month. Below is a list of how the ten most popular performed.
Stocks widely-held by mid-cap funds lagged in the consumer discretionary, consumer staples, health care, industrials and utilities sectors. On the other hand, stocks held by mid-size funds that outperformed were mainly in the materials, telecom services, financials, and energy and tech sectors, the report said.
Of the top 25 stocks held by mid-cap funds, Skyworks Solutions, F5 Networks,Polaris Industries, Stericycle, Mednax and Universal Health Services were the biggest drags on performance in October, Credit Suisse said.
"The 25 most crowded names in long-only, actively managed small and large cap funds outperformed in October, while the 25 most crowded names in mid cap funds lagged for the 2nd month in a row," Credit Suisse said.
The S&P 500 Index rose 8.3% in October, snapping back from its third-quarter lull from extreme global market volatility. The technology sector dominated stocks that had the best returns during the period, aided by strong earnings reports and continued consolidation in the semiconductor industry.
Should investors buy or sell the mid-cap fund "darlings"? Here are the one-month performances of the top 10 stocks held by mid-cap funds. And when you're done check out how the 10 stocks most widely held by large-cap funds performed in October. Ratings from TheStreet Ratings were included for another perspective.
TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
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10. Alliance Data Systems Corp.
(ADS) - Get Report
Sector: Technology/Data Processing & Outsourced Services
Number of Large-Cap Funds Invested: 47
October Return: 14.8%
TheStreet Said: TheStreet Ratings team rates ALLIANCE DATA SYSTEMS CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate ALLIANCE DATA SYSTEMS CORP (ADS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 27.2%. Since the same quarter one year prior, revenues rose by 20.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $467.38 million or 22.93% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -10.35%.
- ALLIANCE DATA SYSTEMS CORP's earnings per share declined by 24.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ALLIANCE DATA SYSTEMS CORP increased its bottom line by earning $7.87 versus $7.43 in the prior year. This year, the market expects an improvement in earnings ($15.03 versus $7.87).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to other companies in the IT Services industry and the overall market on the basis of return on equity, ALLIANCE DATA SYSTEMS CORP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- You can view the full analysis from the report here: ADS
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9. Ulta Salon, Cosmetics & Fragrance Inc. (ULTA) - Get Report
Sector: Consumer Goods & Services/Specialty Stores
Number of Large-Cap Funds Invested: 48
October Return: 6.5%
TheStreet Said: TheStreet Ratings team rates ULTA SALON COSMETCS & FRAG as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate ULTA SALON COSMETCS & FRAG (ULTA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and solid stock price performance. We feel its strengths outweigh the fact that the company shows weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 19.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ULTA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.41, which illustrates the ability to avoid short-term cash problems.
- ULTA SALON COSMETCS & FRAG has improved earnings per share by 22.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ULTA SALON COSMETCS & FRAG increased its bottom line by earning $3.97 versus $3.14 in the prior year. This year, the market expects an improvement in earnings ($4.74 versus $3.97).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 22.0% when compared to the same quarter one year prior, going from $60.79 million to $74.17 million.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 42.56% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- You can view the full analysis from the report here: ULTA
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8. Polaris Industries Inc.
(PII) - Get Report
Sector: Consumer Goods & Services/Leisure Products
Number of Large-Cap Funds Invested: 48
October Return: -6.3%
TheStreet Said: TheStreet Ratings team rates POLARIS INDUSTRIES INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate POLARIS INDUSTRIES INC (PII) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 1.1%. Since the same quarter one year prior, revenues rose by 11.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- POLARIS INDUSTRIES INC has improved earnings per share by 11.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, POLARIS INDUSTRIES INC increased its bottom line by earning $6.65 versus $5.40 in the prior year. This year, the market expects an improvement in earnings ($7.40 versus $6.65).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Leisure Equipment & Products industry average. The net income increased by 10.2% when compared to the same quarter one year prior, going from $140.83 million to $155.17 million.
- Net operating cash flow has increased to $374.09 million or 49.92% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 6.84%.
- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.45 is very weak and demonstrates a lack of ability to pay short-term obligations.
- You can view the full analysis from the report here: PII
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7. Signature Bank NY
(SBNY) - Get Report
Sector: Financial Services/Regional Banks
Number of Large-Cap Funds Invested: 49
October Return: 8.3%
TheStreet Said: TheStreet Ratings team rates SIGNATURE BANK/NY as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate SIGNATURE BANK/NY (SBNY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 3.3%. Since the same quarter one year prior, revenues rose by 18.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SIGNATURE BANK/NY has improved earnings per share by 23.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SIGNATURE BANK/NY increased its bottom line by earning $5.97 versus $4.77 in the prior year. This year, the market expects an improvement in earnings ($7.20 versus $5.97).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Commercial Banks industry average. The net income increased by 25.3% when compared to the same quarter one year prior, rising from $76.81 million to $96.23 million.
- The gross profit margin for SIGNATURE BANK/NY is currently very high, coming in at 84.73%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 33.08% significantly outperformed against the industry average.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.98% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- You can view the full analysis from the report here: SBNY
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6. F5 Networks Inc.
(FFIV) - Get Report
Sector: Technology/Communications Equipment
Number of Large-Cap Funds Invested: 49
October Return: -4.8%
TheStreet Said: TheStreet Ratings team rates F5 NETWORKS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate F5 NETWORKS INC (FFIV) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 7.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- FFIV has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.40, which illustrates the ability to avoid short-term cash problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, F5 NETWORKS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for F5 NETWORKS INC is currently very high, coming in at 85.63%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.35% is above that of the industry average.
- Net operating cash flow has slightly increased to $183.34 million or 7.93% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -10.40%.
- You can view the full analysis from the report here: FFIV
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5. BorgWarner Inc.
(BWA) - Get Report
Sector: Consumer Goods & Services/Auto Parts & Equipment
Number of Large-Cap Funds Invested: 49
October Return: 3%
TheStreet Said: TheStreet Ratings team rates BORGWARNER INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate BORGWARNER INC (BWA) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, BWA has a quick ratio of 1.68, which demonstrates the ability of the company to cover short-term liquidity needs.
- BORGWARNER INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BORGWARNER INC increased its bottom line by earning $2.86 versus $2.71 in the prior year. This year, the market expects an improvement in earnings ($2.98 versus $2.86).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.6%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for BORGWARNER INC is currently lower than what is desirable, coming in at 25.29%. Regardless of BWA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.35% trails the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Auto Components industry and the overall market on the basis of return on equity, BORGWARNER INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full analysis from the report here: BWA
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4. Affiliated Managers Group
(AMG) - Get Report
Sector: Financial Services/Asset Management & Custody Banks
Number of Large-Cap Funds Invested: 49
October Return: 5.4%
TheStreet Said: TheStreet Ratings team rates AFFILIATED MANAGERS GRP INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate AFFILIATED MANAGERS GRP INC (AMG) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AMG's revenue growth has slightly outpaced the industry average of 4.7%. Since the same quarter one year prior, revenues slightly increased by 1.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Capital Markets industry and the overall market, AFFILIATED MANAGERS GRP INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- AFFILIATED MANAGERS GRP INC has improved earnings per share by 32.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AFFILIATED MANAGERS GRP INC increased its bottom line by earning $7.99 versus $6.49 in the prior year. This year, the market expects an improvement in earnings ($12.75 versus $7.99).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 30.0% when compared to the same quarter one year prior, rising from $99.00 million to $128.70 million.
- Net operating cash flow has slightly increased to $351.40 million or 7.06% when compared to the same quarter last year. Despite an increase in cash flow of 7.06%, AFFILIATED MANAGERS GRP INC is still growing at a significantly lower rate than the industry average of 79.46%.
- You can view the full analysis from the report here: AMG
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3. Ross Stores Inc.
(ROST) - Get Report
Sector: Consumer Goods & Services/Apparel Retail
Number of Large-Cap Funds Invested: 50
October Return: 4.4%
TheStreet Said: TheStreet Ratings team rates ROSS STORES INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
We rate ROSS STORES INC (ROST) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.35% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ROST should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- ROSS STORES INC has improved earnings per share by 10.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ROSS STORES INC increased its bottom line by earning $2.21 versus $1.94 in the prior year. This year, the market expects an improvement in earnings ($2.45 versus $2.21).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 8.0% when compared to the same quarter one year prior, going from $239.56 million to $258.64 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 8.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Specialty Retail industry and the overall market, ROSS STORES INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- You can view the full analysis from the report here: ROST
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2. Skyworks Solutions Inc.
(SWKS) - Get Report
Sector: Technology/Semiconductors
Number of Large-Cap Funds Invested: 51
October Return: -8.3%
TheStreet Said: TheStreet Ratings team rates SKYWORKS SOLUTIONS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate SKYWORKS SOLUTIONS INC (SWKS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 12.9%. Since the same quarter one year prior, revenues rose by 38.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SWKS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.66, which clearly demonstrates the ability to cover short-term cash needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, SKYWORKS SOLUTIONS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for SKYWORKS SOLUTIONS INC is rather high; currently it is at 53.70%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 25.60% is above that of the industry average.
- Net operating cash flow has increased to $221.90 million or 11.50% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -30.92%.
- You can view the full analysis from the report here: SWKS
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1. Tractor Supply Co.
(TSCO) - Get Report
Sector: Consumer Goods & Services/Specialty Stores
Number of Large-Cap Funds Invested: 54
October Return: -9.6%
TheStreet Said: TheStreet Ratings team rates TRACTOR SUPPLY CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
We rate TRACTOR SUPPLY CO (TSCO) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, increase in net income, revenue growth, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company shows low profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TRACTOR SUPPLY CO has improved earnings per share by 16.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TRACTOR SUPPLY CO increased its bottom line by earning $2.66 versus $2.33 in the prior year. This year, the market expects an improvement in earnings ($3.08 versus $2.66).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 14.0% when compared to the same quarter one year prior, going from $76.60 million to $87.31 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 8.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has significantly increased by 847.07% to $10.04 million when compared to the same quarter last year. In addition, TRACTOR SUPPLY CO has also vastly surpassed the industry average cash flow growth rate of -11.19%.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.81% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- You can view the full analysis from the report here: TSCO