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, 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.
is one of the world's largest integrated energy companies. The company is engaged in every aspect of the oil and natural gas industry, with major operations in many important gas and oil producing regions worldwide.
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 a net income of $5.17 billion, or $2.48 per diluted share, compared with $4.72 billion, or $2.18 per diluted share, in the first quarter of fiscal 2007. This represented a 9.6% increase in net income, while earnings per share 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 $46.30 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 affect revenue. Furthermore, lower sales volumes and margins on the sale of refined products could also negatively affect the company's bottom line.
is a global independent energy company that explores for, produces, purchases, transports and sells crude oil and natural gas. The company also manufactures, purchases, trades and markets refined petroleum and other energy products. 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 because of 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. An increase in the company's average daily production of natural gas and crude oil also contributed to the improvement in total revenue and non-operating income.
Hess also announced that its first-quarter net income surged to 105.1% to $759 million from $370 million a year ago, again because of higher crude oil prices and increased production. Additionally, net operating income increased significantly in the first quarter, rising 84.03% when compared with 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.
is one of the nation's largest grocery retailers. It also manufactures and processes some of the food for sale in its supermarkets and 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 had generally poor debt management, we feel that the rating is justified by 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% 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 affected by increased competition, weather and economic conditions, interest rates and labor disputes, among other factors.
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; and chemicals and plastics.
ConocoPhillips has been rated buy since April 2003. While the company currently shows low profit margins, we feel 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% 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 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 prices of crude oil and natural gas 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.
Public Service Enterprise Group
is 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 buy since November 2006. The company generates about two-thirds of its operating income from the power segment, which contributed to the 36.2% year-over-year rise in net profits due to increased output. The company's strong financial performance was evident in an increase in net income 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 per common 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.
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.