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. 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 9.3% to 14.4%. This is a clear sign of strength within the company. In addition, the company's very low debt-to-equity ratio of 0.1 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 1.3 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 495 billion yen on operating revenue of 4,597 billion yen. 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 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 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 33.1% to 39.2%. In addition, the company has a very low debt to equity ratio of 0.1, implying that ExxonMobil 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 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 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, & 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.
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.
owns and operates Florida Power & Light Company, supplying electric service to a population of more than eight million throughout most of the east and lower west coasts of Florida. We had previously rated it a hold but upgraded it to a buy on Jan. 8. This rating is supported by the company's revenue growth, increase in net income, improved EPS and relatively strong performance in comparison with the S&P 500 during the past year.
For the third quarter of fiscal 2008, the company's revenue growth of 17.7% year over year was higher than the industry average of 6.5%. The company's EPS improved 44.4% in the third quarter when compared to the same quarter last year. The EPS results increased from $1.33 to $1.92, continuing a trend of positive EPS growth over the past two years. Net income also increased significantly, rising 45.2% from $533 million to $774 million. FPL's net profit margin of 14.4% compares favorably to the rest of the industry. Although FPL's share price is off by a sharp 29.7% when compared to a year ago, its decline was not as bad as the broader market plunge during the same time frame. The improvement in EPS may have helped cushion the fall a bit, and the stock price drop should not necessarily be considered a negative at this time.
Management was pleased to be able to report solid performance in the third quarter. Despite difficult economic conditions, the company remained on track to meet its previously stated guidance for full-year fiscal 2008. Although the company has relatively poor debt management based on most measures that we evaluated, we feel that the strengths detailed above outweigh any weaknesses at this time.
provides communication services in the U.S. and internationally. We've rated it a buy since May 2008. Our rating is driven by such strengths as the company's growth in revenue, net income, and EPS, as well as its good cash flow from operations and largely solid financial position.
For the third quarter of fiscal 2008, revenue increased slightly, rising 4.1% year over year. EPS improved 34.1% when compared to the third quarter of fiscal 2007, increasing from 44 cents to 59 cents per share. Verizon's net income growth exceeded that of both the S&P 500 and the Diversified Telecommunication Services industry. Net income increased 31.3% in the third quarter. Net operating cash flow also improved slightly, increasing by 8.8% when compared with the same quarter last year. In addition, the company's debt-to-equity ratio is somewhat low at 0.9, implying that there has been a relatively successful effort to manage debt levels.
Management stated that Verizon's strategic investments in recent years continued to drive growth in wireless, enterprise, broadband, and video in the third quarter. The company plans to continue investing for future growth based on its business plan, despite the current economic conditions. Although a very weak quick ratio indicates that the company may face challenges in financing short-term obligations from normal operations, and the stock itself has shown lackluster performance of late, we feel that the strengths detailed above outweigh any weaknesses at this time.
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.