Each weekday, 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, updated daily, 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 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.
Leading the list today is
, which makes navigation, communications and information devices based on GPS technology. It has been rated buy since August 2005. The company has shown outstanding revenue growth, notable return on equity and a two-year pattern of steady increases in EPS, and it is carrying no debt.
These strengths outweigh the fact that Garmin is trading at a premium valuation according to TheStreet.com Ratings' review of its current price compared with factors such as earnings and book value.
, which makes complex metal components and products for the aerospace and industrial gas turbine industries, has been rated buy since August 2005. The company has recently made acquisitions expanding its casting, forging and fastener product offerings, and these should fuel revenue growth. Precision's net income has also been increasing as a result of strong top-line growth combined with an improvement in operating margin and a lower interest expense.
Because Precision depends on the aerospace industry for its top-line growth, any slowdown in that industry could reduce demand for its products. Other possible concerns include fluctuations in the prices of basic materials and any unseen difficulty in integrating recent acquisitions.
Electronic instruments and electromechanical device manufacturer
has been rated a buy since July 2005. The company's acquisition strategy is expected to augment revenue growth, with nearly 30 acquisitions completed since 1999. In June, the company announced the acquisition of Hamilton Precision Metals, which will diversify its electromechanical segment. That same month, it announced the acquisition of two privately held aerospace businesses. In addition, the company has invested more than $300 million in new product initiatives over the last five years.
The company's second-quarter revenue was up 15.3% on the year to $519.47 million. Its net income increased by 24.8% to $58.01 million in the same time frame. The principal risks to the buy rating include possible difficulties integrating acquisitions, rising raw-material costs and any prolonged downturn in the aerospace and defense, heavy-vehicle and process instrumentation markets.
Oilfield services company
has been a rated buy since July 2005. It saw double-digit revenue growth across its segments in the second quarter compared with the same period last year, and its operating margin for the quarter hit 28.16%, driven by increased exploration and drilling activity. Schlumberger also completed the acquisitions of Geosystem and Tyumenpromgeofizika, a supplier of land and marine electromagnetic and seismic imaging services, and a geophysical and wireline logging services provider in Western Siberia, respectively.
Schlumberger also shows a strong net income growth and improved return on equity, a clear sign of strength within the company. The stock is not without its risk. In the short term, management has cautioned of uncertainty in its North American market due to a rapid rise in gas storage levels and expected declines in commodity prices. These factors could hurt the company's performance over the long run.
Air Products and Chemicals
, a chemical and gas producer, has been rated buy since August 2005, on the basis of the company's strong revenue growth, increasing net income, expanding operating margin and improved return on equity. In July, Air Products and Chemicals said that third-quarter sales surged 15.6% to $2.6 billion compared with the same period last year.
Earnings climbed 35.5% to $284.9 million, or $1.28 a share, in the quarter, sparked by higher sales volume and expanding operating margins. Return on equity for the quarter improved 136 basis points to 16.61%, primarily because of the increase in net earnings. Risks to the buy rating include challenges associated with integrating acquisitions and an unfavorable effect of currency fluctuation.