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
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.
First up is
, a global independent energy company that explores for, produces and sells crude oil and natural gas. The company conducts exploration and production activities in countries worldwide, including the U.S., the UK, Norway, Denmark, Equatorial Guinea, Gabon, Azerbaijan, Thailand and Indonesia. Hess operates about 1,250 retail facilities in the eastern U.S., along with a convenience store network.
We have rated Hess a buy since August 2004 due to a variety of strengths. Propelled by price increases for natural gas, natural gas liquids and oil, the company's total revenue and non-operating income for the first quarter of fiscal 2008 rose 45.4% year-over-year. The improvement also came from an increase in the company's average daily production of natural gas and crude oil. First-quarter net income surged to 105.1% to $759 million from $370 million a year ago, again due to higher crude oil prices and increased production. Additionally, net operating income rose 84% over the same quarter last year.
While oil prices are currently trading at record levels, these prices are also highly volatile and cyclical in nature. Because Hess generates a significant portion of its income from the production of oil and gas, any significant unexpected downturn in oil prices could negatively affect the company's earnings. Such a downturn could occur if high oil prices generate higher demand for low-cost alternatives or if the slowdown in the U.S. economy and weakness in the U.S. labor market put further pressure on the demand for oil and gas products.
Next up is
Public Service Enterprise Group
, a public utility holding company. It operates four wholly-owned subsidiaries that engage in the transmission, distribution and sale of electric energy and natural gas, primarily in the Northeastern and Mid-Atlantic U.S.
Public Service Enterprise Group has been rated a buy since November 2006. The company generates about two-thirds of its operating income from its power segment, which contributed to the 36.2% year-over-year rise in net profits due to increased output. The company's net income rose from $329.7 million in the first quarter of fiscal 2007 to $448 million in the first quarter of fiscal 2008. The company paid a quarterly dividend of 32 cents a share for the first quarter.
Looking ahead, the company reiterated its operating earnings guidance for fiscal 2008 in the range of $2.80 to $3.05 per share, which is 8% higher than fiscal 2007 operating earnings. Additionally, management reported that the company's focus on strong operations allowed it to maintain a competitive cost structure. Public Service Enterprise Group is exposed to risks arising from the reliability of power plants and transmission and distribution equipments, along with safety hazards in its nuclear plants.
, one of the world's largest integrated energy companies. It's engaged in every aspect of the oil and natural gas industry, with major operations in many important gas and oil producing regions worldwide. Household products, packaging and fuel additives are made from the chemicals that Chevron produces. Chevron also works in manufacturing, marketing and transportation, along with other interests that include coal mining operations, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies. Chevron is headquartered in California, and conducts operations in more than 100 countries.
We have rated Chevron a buy since October 2003. This rating is based in part on the company's strong growth in revenue and earnings, as well as its attractive valuation levels. For the first quarter of fiscal 2008, Chevron's revenue rose 39.6% year-over-year. The company reported net income of $5.17 billion, or $2.48 a share, compared to $4.72 billion, or $2.18 a share, in the first quarter of fiscal 2007. This represented a 9.6% increase in net income, while earnings per share (EPS) improved 13.8% when compared with the same quarter one year ago. Additionally, net sales for the quarter were boosted by higher prices for crude oil, natural gas and refined products, growing to $64.66 billion from $46.3 billion a year ago.
The company reported that strong cash flows from operations allowed it to fund major development projects as a foundation for future growth. Bear in mind, however, that the company's performance depends largely on the movements of crude oil and natural gas prices. Any adverse changes in these prices could negatively impact revenue. Furthermore, lower sales volumes and margins on the sale of refined products could also negatively affect the company's bottom line.
Next up is
, a multinational energy company that operates in more than 130 countries. Together with its subsidiaries, the France-based 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). The company also produces base chemicals such as petrochemicals and fertilizers, cholorochemicals, performance polymers and specialty chemicals for the industrial and consumer markets. Additionally, Total has interests in the coal mining and power generation.
Total has been rated a buy since September 2004, showing strengths in increased net income, solid stock price performance and a remarkable record of EPS growth. For the first quarter of fiscal 2008, Total reported net income of 3.60 billion euros, which reflects an 18% year-over-year increase. Continuing its pattern of positive EPS growth, the company's adjusted EPS expressed in dollars increased 26% when compared to the first quarter of fiscal 2007. Total attributes its recent quarterly performance to 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.
Total expressed a positive outlook going forward, as oil prices continued to rise at the beginning of the second quarter of fiscal 2008. 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, environmental regulatory considerations and general economic conditions.
And finally there's
, which operates worldwide as an integrated energy company. The Houston-based company operates in nearly 40 countries. It centers its business on four core activities: 1) exploration and production; 2) refining, marketing, supply and transportation; 3) natural gas gathering, processing and marketing; and 4) chemicals and plastics.
ConocoPhillips is currently exploring for oil, natural gas, and natural gas liquids around the world in 23 countries, with production in 16 countries. It operates 12 refineries in the U.S., six in Europe and one in Asia. The company has a 50% interest in Chevron Phillips Chemical Co., which produces chemicals and plastics worldwide. In addition, ConocoPhillips works to develop energy sources and new technologies based on its expertise and existing businesses.
ConocoPhillips has been rated a buy since April 2003. The company displayed impressive financial performance in the first quarter of fiscal 2008, benefitting from rising oil prices. In the first quarter, revenue increased by 36.1% year-over-year. Net income also increased, rising by 16.7% to $4.14 billion. EPS came in at $2.62, up from $2.12 in the first quarter of fiscal 2007.
We believe that the company's strategic growth initiatives and strong fundamentals should help it continue this kind of positive financial performance in the future. The company recently improved its debt-to-equity ratio to 0.31, from 0.37 at the end of the first quarter of fiscal 2007. Combining this with an increased cash and equivalents balance provides the company with the financial flexibility to fund new projects and enhance shareholders' value. Bear in mind, however, 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.
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.