Top Five Mid-Cap Stocks: DeVry, Berry

Berry Petroleum, Circor, DeVry, Harsco and Energen are all on top.
By TheStreet Ratings Staff ,

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 we focus on mid-caps. These are stocks of companies that have market capitalizations of between $500 million and $10 billion that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 60 factors.

The stocks must also be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. They are ordered by their potential to appreciate.

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.

Berry Petroleum

(BRY) - Get Report

is an independent energy company that produces, develops, acquires, exploits and explores for crude oil and natural gas. The company has operations in California, Colorado and Utah, as well as interests in undeveloped and prospective oil and gas leasehold land positions in the western U.S. Berry is also expanding into the Rockies and Mid-Continent for light oil and natural gas. The company was founded in 1909 and had 243 employees as of December 2007.

Our buy rating for Berry has not changed since June 2003. Strengths can be seen in multiple areas, including growth in revenue and net income. Revenue grew 58% year over year for the first quarter of fiscal 2008. This appears to have helped boost earnings per share, which improved to 95 cents from 42 cents in the same period. Net income more than doubled $43 million.

Management reports that the company is on target to achieve a 10% increase in production and net proved reserves and will be in an excellent financial position in 2008. Powered by its strong earnings growth and other factors, this stock's price has surged 42% over the past year, and we feel that the it could move higher despite having already enjoyed nice gains. Berry's strengths outweigh a somewhat disappointing return on equity. However, it is important to remember that any stock can fall in a major bear market.

Circor

(CIR) - Get Report

has been manufacturing an array of valves since the early 1900s. Valves range in application from generic products for heating and cooling to more specialized steam catapult valves on nuclear-powered aircraft carriers and cryogenic valves used in space shuttles. The company also designs, makes and distributes a variety of related products, such as fittings, actuators, condensate pumps, flow meters and water heaters. It provides a range of services to assist customers in the installation and maintenance of fluid-control systems. CIRCOR operates 16 manufacturing facilities in the U.S., Canada, Western Europe and China and services more than 12,000 customers in over 119 countries.

CIRCOR has been rated a buy since November 2004. Strengths include an impressive record of EPS growth, revenue improvement and solid stock-price performance. Earnings per share grew 69% year over year for the first quarter of fiscal 2008, which brought its three year average EPS growth rate to a solid 48%. The company reported 9.5% growth in revenue over the same period, which trailed the industry average but helped boost net income, which grew 74%. In addition, as of the market's close on May 20, CIRCOR's share price has jumped 39% over the past year. The stock currently trades at a valuation level that is in line with its peer average and a discount to the

S&P 500

average.

We feel that these strengths outweigh a relatively low operating profit margin of 11%. In its release reporting first-quarter results, the company indicated that its orders grew 27% year over year on the back of strength in its naval, aerospace and energy markets. Its backlog jumped 45% from the year-ago quarter. Management is guiding investors to expect second-quarter EPS in the range of 74 cents to 83 cents, excluding special charges. This compares with 60 cents for the second quarter of fiscal 2007.

DeVry

(DV)

is an international higher-education company. DeVry University offers career-oriented undergraduate and graduate programs in technology, business and management.

The company has been rated a buy since January 2007. DeVry's strengths can be seen in its impressive record of earnings-per-share growth, compelling improvement in net income, revenue growth, and a solid financial position. For the third quarter of fiscal 2008, DeVry reported EPS of 53 cents, vs. 32 cents one year prior. This increase continues the company's demonstrated pattern of EPS growth over the past two years, a trend that we feel should continue. Third-quarter net income of $38.3 million represents an increase of 67% from the year-ago quarter. DeVry also has no debt to speak of, and its revenue rose 18% in the second quarter.

In other developments, the company disclosed on May 19 that federal investigators have launched an investigation into the company's recruitment practices, and that management is cooperating fully with this probe. While we believe the stock is a strong one based on its quantitative merits, this is a situation that bears watching.

Harsco

(HSC) - Get Report

is a diversified multinational provider of industrial services and engineered products. The company works with a variety of industries, including steel, construction, railways and energy. Harsco operates in three business segments: Mill Services, Access Services and Minerals and Rail Services and Products. The company has locations in 45 countries, including the U.S.

Harsco has been rated a buy since March 2003, based on various company strengths, such as its growth in revenue and net income and its largely solid financial position. Revenues rose 18% year over year for the first quarter of fiscal 2008. Earnings per share improved 24%. Net income increased 20% over the same period to $57 million. The company's current debt-to-equity ratio of 0.71 implies that the company has successfully managed its debt levels.

Management was pleased with what it considered a strong start to fiscal 2008 and remains confident in its outlook. With almost 70% of the company's revenues generated outside the U.S., the company feels that it has effectively limited its exposure to domestic economic conditions. Management raised its full-year 2008 guidance for EPS from continuing operations to a new range of $3.45 to $3.55 per diluted share from the previous range of $3.40 to $3.50 per diluted share.

Although the company reported a disappointing return on equity, we feel that its strengths outweigh this weakness. While the stock's increase in price over the past year has made it relatively expensive compared to the rest of its industry, we feel that the company's strengths justify the higher price levels at this time.

Energen

(EGN)

is an energy holding company that engages in the acquisition, development, exploration and production of oil, natural gas and natural gas liquids in the United States. The company has two subsidiaries, Energen Resources Corporation and Alabama Gas Corporation. Energen Resources, which explores for and produces oil and gas, generates about 85% of the company's consolidated net income. Alabama Gas Corporation is the largest natural gas distributor in Alabama. Energen is based in Birmingham.

Energen has been rated a buy since January 2006. A number of positive investment measures should help this stock outperform the majority of stocks that we rate. Energen's revenue increased slightly in the first quarter of fiscal 2008, rising 5.9% year over year. This growth appears to have helped boost the company's earnings per share by 13% year over year. In addition, net income improved, rising 12% from 103.9 million a year ago to $116.7 million in the first quarter. Energen's expanding profit margins are also strengths, as the company reported that its gross profit margin increased to 45.60%, compared to 43% in the first quarter of 2007.

Management was pleased with the first-quarter results and is excited about Energen's future outlook. The company has capitalized on the recent upward momentum of oil and gas market prices by strengthening its hedge position for 2009 and 2010 production in order to help lock in earnings and cash flow growth. Additionally, management announced its new earnings guidance for fiscal 2008, with earnings per diluted share now estimated to be in the range of $4.15 to $4.55 due to the current market strength of commodity prices.

However, any significant decline in natural gas and oil prices along with any unfavorable regulatory movements could negatively affect the company's business and future profitability.

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 impact the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

This article was written by a staff member of TheStreet.com Ratings.

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