Each business day,
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, all-around-value stocks are in the spotlight. These are stocks of companies that meet a number of criteria, including annual revenue of more than $500 million, lower-than-average valuations such as a price-to-sales ratio of less than 2, and leverage that is less than 49% of total capital.
In addition, they must 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.
The Kroger Company
is one of the nation's largest grocery retailers. The company also manufactures and processes some of the foods that it sells in its supermarkets, as well as operates a variety of additional store formats that include convenience stores, multi-department stores and mall jewelry stores.
Our buy rating for Kroger has been in place since March 2006. Although the company has generally had poor debt management, we believe that the rating is justified due to strengths such as the company's return on equity, attractive valuation levels and growth in revenue, net income and earnings per share. For the first quarter of fiscal 2008, Kroger reported a revenue increase of 11.5% year over year, while net income grew 14.5%.
Earnings per share also improved, rising 23.4% from 47 cents in the first quarter of fiscal 2007 to 58 cents in the most-recent quarter. The company's total sales increased 11.5%, while identical supermarket sales increased 9.2% with fuel and 5.8% without fuel. Return on equity also improved slightly in the first quarter, rising to 24.73% from 21.79% in the prior-year quarter.
On the basis of a strong start to fiscal 2008, Kroger raised its identical sales and earnings guidance for fiscal 2008. Management now anticipates identical sales growth of 4.0% to 5.5%, excluding fuel, while estimating earnings of $1.85 to $1.90 per diluted share.
The company had previously released earnings guidance of $1.83 to $1.90 per diluted share. While management is confident in the underlying strength of the company's business model, bear in mind that future financial results could be negatively impacted by increased competition, weather and economic conditions, interest rates and labor disputes, among other factors.
is a worldwide oil and gas exploration and production company. The company is headquartered in El Dorado, Arkansas.
Murphy Oil has been rated a buy since March 2003. The company's strengths include its healthy growth in net income and revenue, solid stock performance and impressive record of earnings per share growth.
For the second quarter of fiscal 2008, the company reported year-over-year revenue growth of 81.3% and net income increased by 150.5%. The growth in net income was driven by higher crude oil prices and sales volume, while higher natural gas prices and an increase in the average daily production of natural gas and crude oil contributed to the improved revenue. The company also reported significant earnings per share (EPS) growth to $3.27 from $1.32 a year ago, continuing its pattern of positive EPS growth over the past two years. Additionally, Murphy Oil's stock price has surged 36.4% over the past year.
It is important to remember that any unexpected sharp downturn in oil and gas prices could negatively affect Murphy Oil's earnings. In addition, oil prices, which are highly volatile and cyclical in nature, are trading at record levels and could be vulnerable to weaker economic conditions. High prices may also create heightened demand for lower-cost alternatives hurting overall demand for oil and gas products.
operates worldwide as an integrated energy company. The company is headquartered in Houston and operates in nearly 40 countries. It centers its business on four core activities: Exploration and Production; Refining, Marketing, Supply, and Transportation; Natural Gas Gathering, Processing, and Marketing; Chemicals and Plastics.
ConocoPhillips has been rated a buy since April 2003. While the company currently shows low profit margins, we believe that strengths such as its robust revenue growth, compelling growth in net income, attractive valuation levels and notable return on equity justify our rating. For the second quarter of fiscal 2008, the company's revenue surged 55.5% year over year. This appears to have helped boost earnings per share, which rose dramatically from 18 cents in the second quarter of fiscal 2007 to $3.50 in the most-recent quarter.
At the same time, net income increased 1,707.0% in the second quarter. Net operating cash flow increased 14%, while the company's return on equity exceeded that of the same quarter one year prior, rising from 12.86% to 19.07%. The company recently signed an interim agreement to develop the Shah gas field in Abu Dhabi, and also approved the continued funding for the development of the Yanbu Export Refinery Project. Additionally, the company plans to expand the Keystone crude oil pipeline system in North America.
Looking ahead, management anticipates full-year fiscal 2008 production to be consistent with the company's operating plan. The company has authorized a $10 billion share repurchase program for fiscal 2008, and expects to repurchase between $2 billion and $3 billion in the third quarter. Bear in mind that crude oil and natural gas prices are highly volatile and cyclical in nature. A downturn from the currently high pricing trends could affect the future profitability of the company, as could further slowdown of the U.S. economy.
is a multinational energy company that maintains operations in more than 130 countries. Together with its subsidiaries, the company engages in all aspects of the petroleum industry, including both upstream (oil and gas exploration, development and production, liquefied natural gas) and downstream operations (refining, marketing, trading, and shipping crude oil and petroleum products).
Total has been rated a buy since September 2004, showing strengths in increased net income, solid stock price performance, and a remarkable record of earnings per share (EPS) growth. For the second quarter of fiscal 2008, Total reported a 61.8% year over year growth in net income to $7.39 billion. Continuing its pattern of positive earnings per share (EPS) growth, the company's adjusted EPS (expressed in dollars) increased 41% when compared with the second quarter of fiscal 2007. The company attributes its recent quarterly performance to the Upstream segment.
Additionally, the company benefitted from the ramp-up of the Dolphin project in the Middle East and the continued ramp-up of production at the Dalia and Rosa fields in Angola. Furthermore, Total made plans to further strengthen its position in the Canadian heavy oil market by launching a public offering to buy Synenco. The company also strengthened its strategic partnerships in Asia by signing an agreement with
China National Offshore Oil
to supply China with approximately one million tons per year of
starting in 2010.
Bear in mind, however, that a number of risk factors could affect Total's future results, including fluctuations in currency or the price of petroleum products, along with environmental regulatory considerations and general economic conditions.
designs, develops, manufactures, and supports technology, products, and services for use across the spectrum of military operations. The company's businesses include: mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments, and munitions; shipbuilding and marine systems; and business aviation.
Our buy rating for General Dynamics has not changed since July 2003. This rating is based on strengths such as revenue growth, an impressive record of earnings per share (EPS) growth and compelling growth in net income. Sales, earnings and operating margins increased in all four General Dynamics business groups in the second quarter of fiscal 2008. The Combat Systems group experienced increased sales in its armored vehicle and tank programs compared with the year-ago period and significant margin growth.
New-aircraft volume in the Aerospace group, increased shipbuilding activity in Marine Systems and continued strong demand for tactical communications and computing systems in the Information Systems and Technology sector also contributed to the overall strong performance. Revenue for the second quarter rose 10.8% year over year. This growth appears to have boosted the company's net income and EPS, which improved by 25% and 26%, respectively.
While the stock is trading 12.7% higher than it was a year ago, it should go without saying that even the best stocks can fall in an overall down market. However, we believe that the company's strengths outweigh the risks inherent in this industry.
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.
For those reasons, we believe a rating alone cannot tell the whole story, and should be part of an investor's overall research.
This article was written by a staff member of TheStreet.com Ratings.