Top Five Fast-Growth Stocks
Each business day, TheStreet.com Ratings compiles a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists in the Ratings section of our Web site.
This list is based on data from the close of the previous trading session. Today, fast-growth stocks are in the spotlight. These are stocks of companies that are projected to increase revenue and profit by at least 12% in the coming year and rank near the top of all stocks rated by our proprietary quantitative model, which looks at over 60 factors.
In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. Please note that definitions of revenue vary by industry, and this screen does not make adjustments for acquisitions, which can materially affect posted results. Likewise, earnings-per-share growth may be affected by accounting charges, share repurchases and other one-time items.
Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.
Ametek
(AME) - Get Report
manufactures electronic instruments and electromechanical devices. The company has operations throughout the U.S. and in more than 30 other countries. The company's Electronic Instruments segment manufactures advanced monitoring, testing, calibrating and display instruments for the aerospace, power and industrial markets worldwide. The Electromechanical segment produces highly engineered electromechanical connectors for hermetic (moisture-proof) applications, specialty metals for niche markets and brushless air-moving motors, blowers and heat exchangers. The products are used in floor care and other specialty applications.
Ametek has been rated a buy since November 2002. The company's strengths include its consistent revenue, earnings per share and net income growth, as well as a solid stock performance. In addition, Ametek's minimal exposure to the housing and automobile markets could insulate it from the sluggish U.S. economy. For the first quarter of 2008, the company reported a 30% year-over-year increase in earnings, led by operational improvements and revenue growth of 21%. Continuing its pattern of EPS growth over the past two years, the company again improved EPS to 62 cents in the most recent quarter from 48 cents in the first quarter of 2007. Net income grew to $66.4 million from $50.9 million a year ago. Furthermore, operating cash flow increased 39% to $77 million. Additionally, the company recently paid a quarterly dividend of 6 cents a share on March 31.
Going forward, Ametek estimates revenue for the full year 2008 to increase in the high teens on a percentage basis, while earnings are estimated to be in the range of $2.47 to $2.52 a share. Management also expects earnings for the second quarter to be approximately 61 cents to 63 cents a share, an increase of 13% to 17% over last year's second-quarter results. However, these results could be negatively affected should the company fail to successfully integrate its recent acquisitions. Other risks include the price and availability of raw materials and changes in the competitive environment.
Diamond Offshore
(DO) - Get Report
engages in the contract drilling of oil and gas wells. The company's fleet of 30 submersibles enables it to offer a range of services in various markets worldwide, including the deep water, harsh environment, and conventional semisubmersible markets. Diamond also owns 13 jack-up rigs, which are mobile, self-elevating drilling platforms equipped with legs that are lowered to the ocean floor until a foundation can be built to support the platform. Finally, Diamond also has one drillship, the Ocean Clipper, located off the shore Brazil.
We have rated Diamond a buy since June 2005, on the basis of various strengths displayed by the company. Boosted by solid sales growth from its Contract Drilling segment, Diamond's revenue surged 29% year over year to $666.7 million in the first quarter of fiscal 2008. First-quarter earnings rose 30%, fueled by a rise in daily rates for the company's deepwater rigs. Net income for the quarter increased to $290.6 million, or $2.09 a share, from $224.2 million, or $1.64 a share, in the first quarter of fiscal 2007. In keeping with its policy of considering the payment of special cash dividends on a quarterly basis, the Board of Directors recently declared a special cash dividend of $1.25 per share of common stock in addition to a regular cash dividend of 12.5 cents per share of common stock. Both dividends are payable in June 2008. Finally, Diamond's debt-to-equity ratio is very low at 0.17, implying successful management of debt.
While lower than a year ago, Diamond's gross profit margin continued to remain relatively high at 62%. However, the company's net profit margin of 37% significantly outperformed against the industry. Furthermore, the company has demonstrated a pattern of positive EPS over the past two years, and we feel that this trend could continue. The slowdown in the U.S. economy and weak job data pose risks to the stock's performance, as they may put pressure on the demand for oil and gas. This could in turn disturb activities related to exploration and production, affecting the number of rigs that are operational in the market and potentially affecting Diamond's future profitability.
Balchem
(BCPC) - Get Report
develops, manufactures and markets specialty performance ingredients and products for the food, feed and mechanical sterilization industries. Balchem produces choline products for both human and animal consumption. Choline, a vitamin-B complex, plays a vital role in the metabolism of fat and the building and maintaining of cell structures. Choline deficiency can result in reduced growth and perosis (a disease characterized by a deformity of the leg joint) in poultry and fatty liver, kidney necrosis, and general poor health in swine, among other symptoms. In humans, choline is recognized as playing a key role in the structural integrity of cell membranes, the processing of dietary fat, reproductive development and neural functions such as memory and muscle function.
Balchem also produces encapsulated performance ingredients for use throughout the food and animal-health industries in end products such as baked goods, refrigerated and frozen dough, processed meats, seasoning blends and confections. These performance ingredients are used to enhance nutritional fortification and improve shelf life of prepared products.
Our buy rating for Balchem has not changed since June 2003. The company's strengths can be seen in its impressive revenue growth, solid stock price performance, and net income improvement. For the fourth quarter of fiscal 2007, revenue leaped 106% year over year. This growth appears to have trickled down to the bottom line, improving EPS, as Balchem reported 27% growth in EPS for the most recent quarter. Net income also increased by 29% when compared to the fourth quarter of 2006, rising from $3.2 million to $4.2 million. Powered by its strong earnings growth and other factors, this stock has surged 28% over the past year.
For fiscal 2007, management was pleased with the integrations of two earlier acquisitions, Chinook and Akzo, and expects those acquisitions to continue to contribute positively to Balchem's earnings. However, management also expects rising raw material costs to be a challenge in the near term. While the company has taken pricing steps to counteract the effects of these increased input costs, such actions in the fourth quarter were not enough to offset them completely. Additional price increases were made effective in January 2008, and management therefore expects fiscal 2008 to see continuing improvements in sales and earnings, while cautioning that global economic issues could affect the company's results.
XTO Energy
( XTO) acquires, develops, exploits and explores oil and gas properties. The company also produces, processes, markets, and transports oil and natural gas. XTO's proved reserves are located primarily in various regions of Alaska, Arkansas, Colorado, Kansas, New Mexico, Oklahoma, Texas and Wyoming. These fields are generally long-lived, with well-established production histories.
We have rated XTO Energy a buy since November 2001. We view the company's revenue growth, stock performance and increase in net income as strengths. For the first quarter of fiscal 2008, the company reported that its net income rose 21% to $465 million from $383 million a year ago, while its revenue rose 43%. Earnings per share improved to 92 cents from 82 cents a year ago. Finally, net operating cash flow increased 12% to $957 million.
Management feels that the first-quarter results reflect a strong start to fiscal 2008, which they hope will be another record year for the company. While the stock's sharp appreciation over the last year has made it a premium compared to some of its peers, we feel the price levels are justified by the strengths of the company. Bear in mind, however, that the company operates in an industry that is highly volatile, and the cyclical nature of oil and gas prices could impact XTO's future results.
Axsys Technologies
( AXYS) designs and manufactures precision optical solutions (such as thermal imaging cameras, stabilized camera systems, motion control systems, and scanning systems) for use by the U.S. government and high performance commercial markets in aerospace, defense, and other applications. Axsys also distributes precision ball bearings used in a variety of industrial and commercial applications.
Our buy rating for Axsys has not changed since November 2003. For the first quarter of fiscal 2008, total revenue increased 59% year over year, driven by strong organic growth across the company's segments. The acquisition of the Gyrostabilized Gimbal Business also helped increase revenue. Strong sales and accretion from the acquisition helped increase earnings by 72% to $5.1 million, or 45 cents a share, from $3 million, or 27 a share, a year ago. Also of note, the company's backlog increased to a record $158 million, representing a 13% increase over last year. This growth was mainly attributed to a large number of infrared orders received for the Common Remotely Operated Weapon System (CROWS) and Thermal Weapons Sight (TWS) programs.
Looking ahead to the second quarter of fiscal 2008, management raised its sales forecast to the range of $224 million to $228 million from its previous guidance of $208 million to $212 million. Earnings per share are forecasted in the range of $1.88 to $1.92. However, any significant reductions or delays in purchases of the company's products by the U.S. government could have adverse effects on Axsys' financial performance, as the company derives a significant portion of its revenue from this source.
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 affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.
For those reasons, we believe that a rating alone cannot tell the whole story and that it should be part of an investor's overall research.
This article was written by a staff member of TheStreet.com Ratings.