This list is based on data from the close of the Dec. 29 trading session.
Today, TheStreet.com Ratings team has compiled a list of the top five stocks in the all-around value category. 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. The company has more than 53 million subscribers in Japan. The company also works to advance mobile technologies and standards through research and development, launching such products as i-mode, a platform for mobile Internet services, and FOMA, the world's first 3G commercial mobile service based on W-CDMA. The company also has a steadily growing international presence through a network of subsidiaries, offices, research facilities, and global partners.
We upgraded NTT DoCoMo 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 (EPS) 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 $0.27 a year ago to $0.39, 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 495.00 billion on operating revenue of Yen 4,597.00 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. The company's primary business involves the exploration for and production of crude oil and natural gas, the manufacture of petroleum products, and the transportation and sale of crude oil, natural gas, and petroleum products. The company, along with its divisions and affiliates, operates and markets products in the United States and about 200 other countries and territories. ExxonMobil explores for oil and natural gas on six continents. The company also holds interests in electric power generation facilities, and its affiliates conduct extensive research programs in support of all of the company's businesses.
Our buy rating for ExxonMobil 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 to the same quarter last year. ExxonMobil also reported significant earnings per share (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 (ROE) exceeded its ROE from the same quarter one year prior, rising from 33.05% to 39.16%. In addition, the company has a very low debt to equity ratio of 0.08, implying that ExxonMobil has successfully managed its debt levels. An adequate quick ratio of 1.09 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 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. Household products, packaging, and fuel additives are made from the chemicals that Chevron produces. Chevron also works in manufacturing, marketing, and transportation, along with other interests that include coal mining operations, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, and technology companies. Chevron is headquartered in California, and conducts operations in more than 100 countries.
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 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 S&P 500 and the Oil, Gas, & 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 59.73% when compare to the same quarter last year.
In addition, a very low debt-to-equity ratio of 59.73% implies that Chevron has successfully managed its debt levels.
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 0.91 could cause future short-term cash flow problems, we feel that the strengths detailed above outweigh any potential weakness at this time.
The DIRECTV Group
provides digital television entertainment in the United States and Latin America. The company's affiliated companies and subsidiaries in the U.S., Brazil, Mexico, and other Latin American countries acquire, promote, sell, and/or distribute digital entertainment programming via satellite to residential and commercial customers. The company serves more than 17.1 million customers in the United States and more than 5.3 million customers in Latin America.
We have rated the DIRECTV Group a buy since May 2006. Our recommendation is based on such strengths as the company's continuing revenue growth, higher return on equity, and increase in net income. DirecTV Group Inc.'s revenue increased 15.1% year-over-year in the third quarter of fiscal 2008, led by solid subscriber growth and a 6.1% increase in average revenue per user. Net income rose 13.8% when compared to the same quarter last year, rising from $319.00 million to $363.00 million, while EPS improved 22.2% from $0.27 to $0.33 during the same time period. DIRECTV Group's return on equity increased slightly over the past year and can be construed as a modest strength for the organization. The company's gross profit margin of 49.70% is considered to be strong. Along with this, the net profit margin of 7.30% is above the industry average.
In addition, the company reported that its free cash flow quadrupled to $332.00 million.
The company announced that it continued to see strong consumer demand for its services and content despite the challenging economic climate. In addition, its third quarter results were consistent with the company's long-term goals at this time. Bear in mind that any decline in finding new subscribers and rise in operating costs may restrict DTV's future financial performance. However, we do not see any significant weaknesses that are likely to detract from the company's overall positive outlook 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. The railway is among the world's top transporters of intermodal traffic, moves more grain than any other American railroad, and hauls enough low-sulphur coal to generate about 10% of the electricity in the United States, according to the company.
We have rated BNSF 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 earnings per share (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 79.75%, while return on equity increased slightly from 16.83% in the third quarter of fiscal 2007 to 17.38% 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.