Each business day, TheStreet.com Ratings 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 -- 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.
Medco Health Solutions
is one of the nation's largest pharmacy benefit managers, providing sophisticated traditional and specialty pharmacy benefit programs and services for clients, members of client-funded benefit plans, and individual patients. We upgraded Medco to a
in December 2008, based on such strengths as its growth, efficiency, and solvency.
The company reported its results for the fourth quarter of fiscal 2008 on Feb. 24. The company reported revenue growth of 15% year over year in the third quarter, boosted in part by record specialty pharmacy revenues of over $2 billion. This growth appears to have helped boost earnings per share, which improved 48.7% when compared to the same quarter a year ago. Net income also increased, rising 37.7% from $214.9 million to $295.7 million over the past year. We are encouraged by a trend of positive EPS over the past two years. Net operating cash flow surged 327.3% in the third quarter. In addition, a debt-to-equity ratio of 0.8 implies that Medco has been somewhat successful at managing its debt levels, although a relatively weak quick ratio of 0.8 shows the potential for future problems in this area.
The company reaffirmed its guidance for full-year 2008, including GAAP diluted EPS of $2.10 to $2.13 and diluted EPS of $2.30 to $2.33. For full-year 2009, Medco anticipated diluted EPS in the range of $2.67 to $2.77. The stock itself has had lackluster performance recently, but we feel that the strengths detailed above outweigh this weakness.
operates retail stores worldwide. The company began with a single discount store in 1962 and now operates approximately 7,390 Wal-Mart and Sam's Club stores in 14 markets. Our
for Wal-Mart has been in place since February 2008. This rating is based on a variety of strengths, including the company's attractive valuation levels, good cash flow from operations, revenue growth, and solid stock price performance.
For the fourth quarter of fiscal 2008, the company reported that its revenue increased slightly, rising 1.6% year over year. Although diluted EPS came in higher than the company's most recent guidance, an overall decline in EPS indicates that the revenue increase did not trickle down to the bottom line. However, return on equity improved slightly when compared to the same quarter one year ago, and net operating cash flow increased 18.7%. Although Wal-Mart's stock price has not changed much over the past year, we feel that the stock has good upside potential at this time.
Management announced that the company's $108 billion in fourth quarter sales was its strongest sales result ever, and stated that the company remains well-positioned for the future due to its pricing. Although Wal-Mart shows low profit margins, we believe that the strengths detailed above outweigh any potential weaknesses 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 FPL Group a hold, but
on Jan. 8. This rating is supported by the company's revenue growth, increase in net income, improved EPS, and good cash flow from operations. FPL's notable return on equity also contributes to this rating.
For the fourth quarter of fiscal 2008, the company's revenue growth of 8.7% year over year was higher than the industry average of 3.4%. This growth was driven by a 39.5% increase in NextEra Resources revenue. Boosted by this revenue growth, the company's EPS improved significantly when compared to the same quarter last year, rising from $0.56 to $1.01. Net income surged 81.7% from $224 million to $407 million.
Looking ahead, management expects its full year 2009 adjusted earnings to be in the range of $4.05 and $4.25 per share. Although the company has demonstrated generally poor debt management based on most measures that we evaluated, we feel that the strengths detailed above outweigh any potential weakness at this time.
is an industry leader in defense and government electronics, space, technical services, and business and special mission aircraft. We have
since October 2004 because of such strengths as its revenue growth, attractive valuation levels, largely solid financial position, and notable return on equity.
For the fourth quarter of 2008, Raytheon reported only slight revenue growth of 1.4% year over year, and this revenue growth does not appear to have trickled down to the bottom line. However, the company has a very low debt-to-equity ratio, and its return on equity has improved slightly when compared to the same quarter a year ago. In addition, the company's fourth quarter sales increased 1.4%, while full year sales improved 9% in fiscal 2008.
Looking ahead to fiscal 2009, Raytheon reaffirmed its 2009 guidance on the basis of what management felt were successful results for fiscal 2008. The company expects net sales in the range of $24.3 billion to $24.8 billion, with full-year EPS anticipated in the range of $4.45 to $4.60 per share. Although the company's stock has shown somewhat lackluster performance recently, we feel that its strengths outweigh any potential weakness at this time.
Nippon Telegraph and Telephone
and its subsidiaries provide a variety of telecommunications services in Japan, along with operating one of the largest telephone networks in the world. We recently
in December 2008 on the basis of the company's attractive valuation levels, good cash flow from operations, and growth in revenue, net income, and EPS.
For the third quarter of fiscal 2008, the company reported revenue growth of 45.2% year over year, which greatly exceeded the industry average of 1.7%. Significant EPS improvement was also recorded in the third quarter, with EPS rising from 43 cents to 81 cents. Net income increased 78.8% when compared to the same quarter last year. In addition, net operating cash flow increased slightly by 4.37%.
Although no company is perfect, we do not currently see any significant weaknesses that are likely to detract from Nippon Telegraph and Telephone's generally positive outlook.
Our quantitative rating, which can be viewed for any stock through our stock screener stock rating screener, 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 affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.For those reasons, we believe that a rating alone cannot tell the whole story and that it should be part of an investor's overall research.