Each business day, TheStreet.com Ratings compiles a list of the top five stocks in one of five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- 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.
provides wireless telecommunications services in Japan. It ranks among the largest cellular phone service operators in the world, as measured by the number of total subscribers. We upgraded it to a buy in February 2008. This rating is supported by a variety of strengths, such as the company's solid stock price performance, impressive record of earnings per share growth and largely solid financial position.
The company reported in October that its earnings surged 40.0% year over year in the second quarter of fiscal 2008 due to lower costs as a result of a reduction in handset incentives. EPS improved 44.4% from 27 cents a year ago to 39 cents, continuing a trend of positive EPS growth over the past year. Return on equity exceeded that of the prior year's quarter, rising from 9.28% to 14.41%. This is a clear sign of strength within the company. In addition, the company's very low debt-to-equity ratio of 0.12 is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, a quick ratio of 1.33 indicates that NTT DoCoMo has the ability to avoid short-term cash problems.
The mobile operations market in Japan is becoming increasingly competitive, due to such factors as price competition and market entry by new businesses. The company has taken these market conditions into account in setting guidance for the fiscal year ending March 2009. Currently, it expects net income of Yen 495 billion on operating revenue of Yen 4,597 billion. Although even the best stocks can fall in an overall down market, we feel that this stock has good upside potential in almost any other market environment. In addition, we feel that its strength outweigh the fact that it currently shows weak operating cash flow.
is a publicly traded international oil and gas company. Our buy rating has not changed since January 2004. The company's strong revenue and net income growth, along with a largely solid financial position, have contributed to this rating.
Although results for the third quarter of fiscal 2008 were impacted by Hurricanes Gustav and Ike in the Gulf of Mexico, the company's revenues rose 34.7% year over year in the third quarter of fiscal 2008. Net income rose to a record $14.8 billion, an increase of 57.6% when compared with the same quarter last year. Exxon Mobil also reported significant EPS improvement, continuing a trend of positive EPS growth over the past two years with an increase from $1.70 per share in the third quarter of fiscal 2007 to $2.86 per share in the most recent quarter. One clear sign of strength for this company is the fact that its current return on equity exceeded its ROE from the same quarter one year prior, rising from 33.1% to 39.2%. In addition, the company has a very low debt to equity ratio of 0.1, implying that Exxon Mobil has successfully managed its debt levels. An adequate quick ratio of 1.1 illustrates the company's ability to avoid short-term cash problems.
Management stated that the company was able to deliver strong financial results despite world financial uncertainty in the third quarter. The company plans to continue with plans for disciplined capital investments in the future, staying consistent with previous guidance of about $25 billion for full year capital and exploration expenditures. Fourth quarter earnings are expected to be reduced due to damage repairs and lower volumes across all business lines as a result of Hurricane Gustav and Ike, although the majority of the company's operations are now back on-line or are in the final stages of start-up. It is important to remember that the company's performance largely depends on the movement of crude oil and natural gas prices, and any adverse pricing changes could therefore negatively impact future results.
is one of the nation's largest grocery retailers. Our buy rating has been in place since March 2006.
The company announced on Dec. 9 that its sales results continued to be strong in the third quarter of fiscal 2008, resulting in a 9% year-over-year increase despite the difficult economy. It reported net earnings for the quarter as $237.7 million, including an after-tax charge related to Kroger's insurance deductible for disruption and damage from Hurricane Ike. Earnings per diluted share were 36 cents. While these results represent a loss over the third quarter of fiscal 2007, last year's results included a tax benefit that the company says increased net earnings by approximately 2 cents to 3 cents per diluted share.
Management stated that Kroger has a strong balance sheet, which has been a competitive advantage for the company in recent years. Its financial strength is expected to continue to be advantageous in the current economic climate. Based on its third-quarter results and the expectation of cautious consumer spending during the holiday season, Kroger raised its fiscal 2008 EPS guidance to $1.88 to $1.91 per diluted share, which would be the equivalent of 11% to 13% growth over fiscal 2007. Looking ahead to fiscal 2009, the company expects same-store sales growth of 3% to 5%, excluding fuel, which should help the company create a favorable return for shareholders despite the challenging economic times.
is one of the world's largest integrated energy companies. We have rated it 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 largely solid financial position and good cash flow from operations.
For the third quarter of fiscal 2008, the company reported revenue growth of 42.3% year over year. This growth appears to have helped boost earnings per share (EPS), which rose significantly from $1.75 in the third quarter of fiscal 2007 to $3.85 in the most recent quarter. Chevron has demonstrated a pattern of positive EPS growth over the past two years, and we feel that this trend should continue. Net income improved by 112.3%, significantly exceeding that of both the
and the oil, gas, and consumable fuels industry. Earnings from Chevron's upstream operations were aided by higher crude oil prices when compared to last year, although the increase was tempered by the effect of hurricanes in the Gulf of Mexico. Earnings from downstream operations were boosted primarily by improved margins on the sale of refined products. Net operating cash flow also increased, rising 59.7% when compared with the same quarter last year.
Given the current economic climate, Chevron announced that disciplined capital spending and tight control over costs would be extremely important to its financial success in the future. Although the company currently shows low profit margins and a weak quick ratio of 0.9 could cause future short-term cash flow problems, we feel that the strengths detailed above outweigh any potential weakness at this time.
Burlington Northern Santa Fe
( BNI) operates one of the largest railroad networks in North America, ranging across 28 states and two Canadian provinces. We have rated it a buy since July 2004. This rating is supported by the company's growth in revenue and net income.
For the third quarter of fiscal 2008, the company reported that its net income surged 31.1% year over year, largely due to a revenue increase of 20.6%. Revenue growth was boosted by strong performances from all of the company's business segments, such as the Agricultural Products segment's 33.3% growth in the third quarter when compared to the same quarter last year. This revenue growth appears to have helped boost BNSF's EPS, which improved 35.1%. Management reported that these results were the best quarterly EPS results in the company's history. Net operating cash flow increased significantly by 79.8%, while return on equity increased slightly from 16.8% in the third quarter of fiscal 2007 to 17.4% in the most recent quarter. In addition, the company's operating income increased 21%.
Management stated that it remains optimistic for the future of the company, despite the significant challenges created by the U.S. and global economies. The company is confident that its long-term financial prospects are good. Bear in mind, however, that the Road and Rail industry is particularly sensitive to the overall health of the economy.
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.