Top Five Fast-Growth Stocks: August 18By TSC 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, 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 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.
is a worldwide manufacturer of filtration systems and replacement parts. Donaldson's principal offices and research facilities are located in Bloomington, Minn., and its primary European administrative and engineering offices in Leuven, Belgium. The company also has extensive operations in the Asia-Pacific region. Donaldson manufactures its products at over 30 plants worldwide, as well as through three joint ventures.
Donaldson has been rated a buy since December 2002. Our rating is based on the company's strong revenue growth, improving margins, low leverage levels and healthy cash position. These positives are further supplemented by higher engine filtration unit sales, robust off-road products and after-market sales, and improved capacity utilization. For the third quarter of fiscal 2008, Donaldson's revenue grew 21.4% year over year, driven by double-digit growth in its industrial products and engine products segments. Led by the higher revenue growth, the company's gross profit margin improved 96 basis points to 34.99% during the quarter, while its operating margin improved 44 basis points to 10.81%. Net income grew 14.5% to $45.99 million from $40.15 million in the third quarter of fiscal 2007. Additionally, Donaldson's cash position was enhanced by a 10.5% increase in cash and cash equivalents, while net operating cash flow soared 112.3% to $57.54 million.
Management was pleased with what it saw as broad-based strength during the quarter, and it expects Donaldson's business conditions to remain good for the balance of fiscal 2008. Bear in mind that delayed shipments and the slowdown in residential construction markets may negatively impact the company's future financial results, as could EPA emissions standards that have affected new truck build rates. Shrinking returns, lower liquidity levels and an unfavorable product mix in gas turbine systems and industrial filtration solutions products could also be areas of concern.
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.
Our buy rating for Balchem has not changed since June 2003. The company again reported record quarterly results in net sales for the second quarter of fiscal 2008, achieving a 41.8% increase year over year due to both organic and acquisition growth. Balchem also reported record net earnings, which increased 16.2% when compared with the second quarter of fiscal 2007. As a result, the company's net earnings per diluted common share increased 13.6% to 25 cents per share from 22 cents per share in the second quarter of fiscal 2007. Additionally, Balchem reported that its balance sheet ratios and cash flow continued to be strong in the second quarter.
Management was pleased with the company's record results in the second quarter despite a difficult business environment. The company has worked to increase its global presence, and overseas demand has helped offset the challenges of the U.S. market. Balchem expects rising raw material costs to continue affecting its financial results in the near term, but management stated that appropriate steps would be taken to minimize the impact on operating margins and cash flow. Bear in mind, however, that global economic issues could still affect the company's results.
is a publicly owned global investment management firm. Its products span a spectrum of fixed income, cash management, equity and alternative investment separate accounts and mutual funds. These include the BlackRock Funds and BlackRock Liquidity Funds families. The company also offers advisory, outsourcing, and investment system services to institutional investors through its BlackRock Solutions product line. The company is headquartered in New York and maintains offices in 19 countries in North and South America, Europe, Asia, Japan, Australia and the Middle East.
BlackRock has been rated a buy since December 2005. For the second quarter of fiscal 2008, the company reported that its earnings increased 23.3% year over year, propelled by strong organic growth in domestic and international assets under management, or AUM. BlackRock's net income advanced to $274.06 million from $222.24 million in the same quarter of fiscal 2007. Revenue swelled 26.4%, driven by impressive AUM growth, a diversified client base and the success of the BlackRock Solutions investment system. Additionally, earnings per share rose 21.3% when compared with the prior-year quarter.
Management was pleased with its strong second-quarter results, especially in the face of the difficulties facing the industry. BlackRock is working with its clients to pursue the investment opportunities that it sees despite highly unstable market conditions, and the firm believes that, while it will not be immune to the effects of the current economy, its strengths will help differentiate it from other firms. Our rating is subject to the risk of any unexpected downturn in the securities markets or the economy in general, any deterioration in relative investment performance and any adverse regulatory developments. Furthermore, slowing trends in the U.S. economy and fluctuations in interest rates could adversely affect the company's performance.
manufactures highly engineered products and materials for the chemical, industrial, energy, transportation and infrastructure markets worldwide. Products are produced at plants in a variety of locations throughout the U.S. -- such as Arkansas, California, Oklahoma, Texas and Washington -- and through subsidiaries in Australia, Colombia, Malaysia, the Netherlands, New Zealand, Saudi Arabia and Singapore.
Ameron has been rated a buy since June 2005. Strong performances from the fiberglass-composite-pipe group and Tamco (Ameron's 50%-owned steel mini-mill) led to higher results in the second quarter of fiscal 2008. The company reported a slight revenue increase of 1.9% year over year, which appears to have helped boost earnings per share from $1.63 in the second quarter of fiscal 2007 to $1.78 in the most-recent quarter. Net income increased 3.4% when compared with the same quarter one year prior, rising from $15.80 million to $16.33 million. Return on equity also improved slightly, and the company appears to be successfully managing its debt levels.
Management was overall pleased with the year-to-date results, as the company's performance for the first half of fiscal 2008 was positive. The company anticipates steady returns for the year from its various businesses, with Tamco and the fiberglass-composite-pipe group expected to continue performing at record levels. However, weak market conditions will most likely continue to negatively affect the infrastructure products group. Bear in mind that the building products industry's performance is cyclical, depending on the overall health of the U.S. economy. The state of the housing and auto markets in particular could impact this industry and, therefore, this stock.
distributes industrial, medical and specialty gases (delivered in packaged or cylinder form) and welding, safety and related products (hard goods). Airgas is the largest producer of nitrous oxide in the U.S., a producer and supplier of dry ice and a supplier of liquid carbon dioxide in the southeastern U.S. Products reach customers through an integrated network of over 900 locations including production facilities, packaged gas fill plants, specialty gas labs, distribution centers, branches and retail stores.
We have rated Airgas a buy since May 2006 based on several positive investment measures, such as the company's robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. On July 23, the company reported that its net earnings in the first quarter of fiscal-year 2009 surged 33.2%, driven by acquisition and organic growth in its key end-markets. Net income rose to $68.88 million, or 81 cents per share, in the quarter from $51.72 million, or 63 cents per share, in the same quarter last year. During the first quarter, revenue ascended 22% to $1.12 billion from $915.10 million a year ago, helped by a 15% contribution from acquisitions and 7% growth in same-store sales. Moreover, the company's strategic product categories, which contribute 40% of total revenue, grew 10% organically. Segment-wise, revenue from gas and rent rose 21.1% to $656.91 million from $542.25 million, while revenue from hard goods increased 23.3% to $459.79 million from $372.85 million in the prior year's quarter. During the quarter under review, Airgas completed the acquisition of the packaged gas operations of Linde Gas USA for $310 million. As per the deal, the acquisition involved 130 locations, including branches, warehouses, packaged gas fill plants and other operations involved in distributing packaged industrial and specialty gases and related equipment.
Looking ahead to the second quarter of fiscal-year 2009, Airgas anticipates its EPS to range from 82 cents to 84 cents per share. For the full fiscal-year 2009, the company raised the lower end of its EPS forecast to a range of $3.30 to $3.40 per share from its previous guidance of $3.24 to $3.40 per share. While the company has a high leverage level, we feel its strengths outweigh the fact that it has had generally poor debt management on most measures that we evaluated.
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.