Each weekday, TheStreet.com Ratings compiles a list of the top 10 stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publishes these lists on the
Ratings section of our Web site
The top-10 rankings are based on our ratings, which assess risk-adjusted returns as well as other criteria specific to the type of stock.
We update the lists at the end of the business day on the basis of information available at the close of the previous trading session. The following day, we publish an article that takes a closer look at the ratings of the stocks on one of the lists.
Today we'll look at mid-cap stocks. These are stocks with market capitalization between $500 million and $10 billion that rate near the top of TheStreet.com Ratings' coverage universe. In addition, the stocks must be followed by at least one financial analyst who posts earnings estimates on the Institutional Brokers' Estimate System. The stocks are ranked in the order of their potential to appreciate.
Leading off this week's list is
, which designs, makes and sells pumps and related equipment for use in construction, industrial, petroleum, agricultural, fire and military applications. It has been rated a buy since November 2005.
The company's gross profit margin for the third quarter of its fiscal year 2006 increased from the same period a year earlier. During the same quarter, Gorman managed to increase sales (20.09%) and net income (147.2%) at a faster pace than the average competitor in its industry. The company is also extremely liquid, and it increased its liquidity in the third quarter, indicating improved cash flow.
Industrial and consumer packaging products maker
has merited a buy rating since December 2004. The company has a wide range of positives, including commendable return on equity and revenue growth that has outpaced the industry average. The company's net operating cash flow increased by 84.1% during the third quarter of 2006 compared with the same period the previous year; this resulted in its stock price increasing 28.84% in 2006.
While Sonoco's price is slightly more expensive than those of its industry peers, and though it has shown low profit margins, its financial strengths justify the price level. Compare its third-quarter net operating cash flow growth of 84.10% with the industry average cash-flow growth rate of -29.32%.
American Eagle Outfitters
has had a buy rating since December 2004. The company's initiatives to spread its market share geographically and build its brand identity have positioned it for consistent growth.
What's more, revenue increased by 19.9% in the third quarter of 2006 over the same period a year earlier. This revenue growth is attributed to a 13% same-store sales growth rate and the contributions from 40 new store openings during the period. Operating margins also increased, and net income grew by 37.7% to $100.94 million during the quarter.
Risks to the rating include alienating the fickle 15-to 25-year-old demographic -- its core customer group -- by rolling out clothing lines that don't change to fit fashion trends. Declining consumer spending or confidence also could present a risk to the buy rating.
Sporting a buy rating since December 2004,
owns and operates two businesses in distinctive sectors: specialty products and lighting equipment. The company has few apparent weaknesses, as evidenced by its fourth-quarter 2006, when its net operating cash flow jumped 21.2% and its earnings per share soared by 52.45% compared with the same period the previous year. With improvements across the board, there's little wonder that its stock price surged 61.81% for 2006. Barring a drastic bear market, it should continue its upward progress.
The real estate and money management service company
Jones Lang LaSalle
has had a buy rating since December 2004. The company boasts a number of impressive strengths, including a return on equity in the third quarter of 2006 that exceeded its return on equity of the previous year (a sign of internal strength), revenue growth of 41.64% for the quarter compared with last year (nearly double that of the industry average) and EPS growth of 19.7% for the quarter.
The company's positive EPS has shown a pattern of reliable increases for the last two years, seen most clearly in its share price, which rocketed upward by 80.19% during 2006.
With positive investment measures across the boards, the company's low profit margins and decreasing liquidity are nothing to be overly concerned about.
Carrying a buy rating since August 2004,
provides drilling services and products to four principal markets: water resources, mineral exploration, geoconstruction and energy. The company enjoyed a stellar third quarter, setting a net earnings record, revenue growth of 63.7% (to $186 million), and an earnings-per-share increase of 61.3%. Despite relatively low liquidity, Layne shows no signs of slowing.
, a full-service transportation provider, offering truck brokerage and logistics services throughout North America, has been rated buy since December 2004. The company's strengths include its notable return on equity, revenue growth and largely solid financial position.
It has reasonable debt levels by most measures, an impressive record of EPS growth and compelling growth in net income. TheStreet.com Ratings believes these strengths outweigh the company's low profit margins.
, which provides a wide selection of surety products from small commercial bonds to large contract bonds, has been rated buy since December 2004. The company's strengths include notable return on equity, good cash flow from operations, solid stock-price performance and revenue growth, and a largely solid financial position with reasonable debt levels by most measures.
CNA Surety's third-quarter return on equity exceeded that of the year-earlier period, a clear sign of strength within the company. Its net operating cash flow for the third quarter of 2006 increased by 240% over the year-earlier period. In addition, CNA Surety vastly surpassed the industry average cash flow-growth rate of 71%.
Although no company is perfect, TheStreet.com Ratings currently does not see any significant weaknesses that are likely to detract from the generally positive outlook. The company's shares rose 44% in 2006, outpacing the
. While any stock can fall in a bear market, TheStreet.com Ratings believes the stock has more room to rise in almost any other market.
designs, manufactures and sells electric motors and drives, among other products and repair parts. Its custom and stock products are sold directly to original equipment manufacturers, and its stock products also are sold to independent distributors for resale. We have rated Baldor buy since December 2004.
The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.
The firm has exceeded the industry average cash-flow growth rate of 18.04%, and it improved earnings per share by 12.1% in the third quarter of 2006, compared with the same quarter a year earlier. The company has demonstrated a pattern of positive EPS growth, and we feel that this trend should continue.
is a holding company for property and casualty insurers that operates primarily in the eastern and midwestern U.S. It has been rated buy since December 2004.
The company's strengths include its notable return on equity, solid stock-price performance, an impressive record of EPS and revenue growth, and a largely solid financial position with reasonable debt levels by most measures. These strengths outweigh the fact that the company shows weak operating cash flow.