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, large-cap stocks are in the spotlight. These are stocks of companies with market capitalizations of over $10 billion that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 62 factors. In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks 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 a buy since September 2005. The company has shown outstanding revenue growth, notable return on equity, 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.
mines, smelts and refines copper in southern Peru. It has had a buy rating since August 2005. The company has benefited from higher metal prices, which have translated into strong growth in revenue and net income. Net income growth has been further driven by expanded operating margins, lower net interest expenses and a decline in the effective tax rate.
The positive trend in net income has contributed to exceptional return on equity. Southern Copper also has a strong project pipeline, with plans to increase copper output by 100,000 tons by 2009. The principal risk to the buy rating emanates from any undue delay in the completion of Southern Copper's capacity expansion and new mine products. Copper supply could also be affected by production stoppages due to labor strikes and the availability of mining equipment, as well as transportation bottlenecks.
produces, sells and distributes industrial gases. It has been rated a buy since August 2005. The buy rating is supported by the company's robust revenue growth, expanding profit margins, increased net income and notable return on equity.
Revenue growth in North America was driven by higher pricing and increased sales volume. European revenue grew as a result of favorable currency effects and volume growth, and revenue in South America increased from new business and plant start-ups. Risks to the company's performance include any inability to derive synergies from the acquisition of Mills Welding and Specialty Gases, failure to drive growth from new capacity additions or unfavorable effects of currency fluctuations.
, which makes motion and control technologies and systems, has been rated buy since October 2006. The company's revenue and net income for the fourth quarter of fiscal 2007 were both up over the year-earlier period, driven by higher sales volume from its aerospace and industrial international divisions. Aerospace sales grew 5.9%, supported by a rise in both commercial original equipment manufacturer and aftermarket volumes. International industrial revenue increased 30.3% on the back of higher sales in Europe, Latin America and the Asia Pacific region. Parker-Hannifin also posted higher return on equity for the quarter.
The company has been involved in a series of acquisitions, most recently of Rectus, a manufacturer of quick disconnect couplings and related products for pneumatic, hydraulic, medical and chemical processing applications. There are potential risks, however. Parker-Hannifin operates in a highly competitive environment, and its growth is partly dependent on the continued development of new products and technologies. A significant portion of the company's revenue comes from customers outside the U.S.; this leaves it vulnerable to adverse foreign policy and currency risk.
, which provides products and services for oil and gas exploration and production, has been rated a buy since May 2006. The company reported a strong financial performance in the recently concluded quarter, benefiting from the favorable industry environment.
Smith International's fiscal second-quarter revenue grew 21.6% to $2.11 billion from a year ago. Net income increased 28.8% to $153.05 million because of lower production, general and administrative costs, which were partially offset by higher net interest expense.
Smith's performance depends on the level of oil and natural gas exploration and development activities, which are cyclical. There has been a rise in oil price in the past two years, which might lead to either a decline in demand or increased use of alternatives.