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.
First up is
Diamond Offshore Drilling
, a contract driller 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
, located off the shore of 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 business segment, Diamond's revenue surged 29.3% year-over-year to $666.7 million in the first quarter of fiscal 2008. First-quarter earnings rose 29.7%, fueled by a rise in daily rates for the company's deepwater rigs. Net income for the quarter increased to $290.63 million, or $2.09 a share, from $224.15 million, or $1.64 a share, in the first quarter of fiscal 2007. Finally, Diamond's debt-to-equity ratio is very low at 0.17, implying that debt levels have been successfully managed.
While lower than a year ago, Diamond's gross profit margin continued to remain relatively high at 61.8%. However, the company's net profit margin of 37% significantly outperformed the industry. Furthermore, the company has demonstrated a pattern of positive earnings-per-share growth over the past two years, and we feel that this trend could continue.
Although the company may harbor some minor weaknesses, we feel that they are unlikely to offset the company's strengths. Instead, we feel that the slowdown in the U.S. economy and weak jobs data pose larger risks 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.
Next up is
, one of the nation's oldest providers of radioactive, hazardous and industrial waste management services. The company's customers are commercial and government entities, such as nuclear power plants, medical and academic institutions, steel mills, refineries and chemical production facilities.
A significant portion of the company's revenue from operating disposal facilities -- those that actively receive and treat waste materials -- comes from one-time clean-up projects, which may span weeks, months or years depending on project scope. American Ecology's non-operating disposal facilities segment consists of facilities that no longer receive waste materials but continue to be monitored and maintained as part of the treatment of previously received waste materials.
We have rated American Ecology a buy since October 2005. Strengths such as revenue growth, a largely solid financial position and a notable return on equity influenced this rating. For the first quarter of fiscal 2008, American Ecology's revenue rose by 18.6% year over year. This growth appears to have trickled down to the bottom line, improving earnings per share by 18.5% over the first quarter of 2007. In fact, the company has demonstrated a pattern of positive EPS growth over the past two years.
A slight improvement in return on equity can be seen as a modest strength for the company. Finally, while total debt increased slightly year over year, it remains at an almost negligible level.
( XTO), a company that acquires, develops and explores oil and gas properties. The company also produces 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 21.4% to $465 million from $383 million a year ago, while its revenue rose 43.2%. This growth appears to have trickled down to the company's bottom line, as EPS improved from 82 cents a share a year ago to 92 cents. Finally, net operating cash flow increased 12.45% to $957 million. Moreover, on June 10, the company disclosed a deal to buy Hunt Petroleum Corp. in a purchase that should boost XTO's oil and gas output by nearly a third.
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.
Next up is
, an international higher education company that operates DeVry University, Ross University, Chamberlin College of Nursing and Becker Professional Review. DeVry University offers career-oriented undergraduate and graduate programs in technology, business and management. Classes are offered at a number of locations, as well as through DeVry University Online.
The company has been rated a buy since January 2007. DeVry's strength's can be seen in a variety of areas, such as its impressive record of EPS growth, compelling growth in net income, revenue growth and largely solid financial position.
For the third quarter of fiscal 2008, DeVry reported EPS of 53 cents, compared to 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. The company's third-quarter net income of $38.32 million represents an increase of 67.2% when compared to the same quarter last year. DeVry also has no debt to speak of, and its revenue rose by 18.4% 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.
And finally this week is
, which 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. Its 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, EPS and net income growth, as well as its solid stock performance. In addition, Ametek's minimal exposure to the housing and automobile markets help insulate it from the sluggish U.S. economy.
For the first quarter of 2008, the company reported a 30.4% increase year over year in earnings, led by operational improvements and a strong revenue growth of 21%. Continuing its pattern of EPS growth over the past two years, the company again reported improved EPS of 48 cents in the first quarter of 2007 to 62 cents in the most recent quarter. Net income grew to $66.36 million from $50.9 million a year ago. Furthermore, operating cash flow increased 39% to $77 million.
On June 12, the company announced plans to acquire Vision Research, a privately held manufacturer of high-speed digital imaging systems used for motion capture and analysis in numerous test and measurement applications. Vision Research has estimated annual sales of roughly $37 million, and will become part of AME's electronic instruments group.
Going forward, Ametek estimates revenue for the full year of 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 per share. Management also expects earnings for the second quarter to be about 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.
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.