Each business day, TheStreet.com Ratings 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, large-cap stocks are in the spotlight.
These are stocks of companies with market capitalizations of over $10 billion that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 62 factors. In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks 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.
is an online retailer that operates various retail websites, including amazon.com, shopbop.com, and endless.com. We upgraded this stock to a
in February 2009 because of the company's impressive top-line growth across geographies, higher earnings, and healthy cash balances.
For the fourth quarter of fiscal 2008, Amazon's revenue increased 18.2% year over year, boosted by higher sales from the North American and International segments. Net income also improved, rising 8.7% from $207 million to $225 million. Earnings per share rose in turn, climbing from 48 cents to 52 cents per share. Cash and cash equivalents jumped 19.8%, while total debt for the quarter dropped 52.1%. Stockholder equity more than doubled to $2.67 billion. As a result, the debt-to-equity ratio improved to 0.3 from 1.2 in the prior year's quarter.
Looking ahead to the first quarter of fiscal 2009, Amazon expects sales in the range of $4.5 billion to $4.9 billion. This would represent an increase of 9% to 19% over the same quarter of fiscal 2008. Be aware, however, that factors like contracting margins and shrinking return on equity could negatively impact the stock's future performance.
is a global educational services company. The company operates through its subsidiaries: University of Phoenix, Institute for Professional Development, College for Financial Planning, Western International University, Meritus University, Insight Schools and Apollo Global. It also owns Aptimus, a provider of innovative digital media solutions. We upgraded our rating on Apollo to a
in July 2008 based on some notable strengths, such as its robust revenue growth, solid stock price performance, impressive record of EPS growth, expanding profit margins and good cash flow from operations.
For the first quarter of fiscal 2009, the company reported that its revenue rose by 24.4% year over year, slightly outpacing the industry average of 18.8% growth. This growth appears to have helped boost Apollo's earnings per share, which improved 34.9% in the most recent quarter when compared to the first quarter of fiscal 2008. We feel that the trend of positive EPS growth over the past two years should continue. Net operating cash flow increased by 83.21% in the first quarter, rising to $380.8 million. In addition, net income increased from $139.9 to $180.4 over the past year.
Management stated that Apollo benefitted in the first quarter from investments made over the past several years. The company believes that the current economy is most likely having a positive effect on its business, as evidenced by year-end 2008 momentum carrying into fiscal 2009. With a strong balance sheet and strong operational and academic teams in place, management is optimistic about Apollo's outlook going forward. While we find the company's return on equity somewhat disappointing, we believe the strengths detailed above outweigh any potential weakness at this time.
is a biopharmaceutical company that discovers, develops and commercializes therapeutics to advance the care of patients suffering from life-threatening diseases worldwide. We upgraded Gilead to a
in October 2008.
For the third quarter of fiscal 2008, revenue increased 29.5% to $1.4 billion from $1.1 billion a year ago due to higher product sales. Product sales surged 39.1% to $1.3 billion from $961.9 million, driven by strong growth of antiviral product sales (these in turn make up the most significant portion of overall revenue for the company). Royalty revenue plunged 72.4% to $25.2 million from $91 million, hurt by decreased Tamiflu royalties from Roche. Contract and other revenue spiked 29.6% to $7.6 million from $5.9 million a year ago. Margins were squeezed, however, as cost growth outpaced that of revenue. EPS rose from 42 cents in the third quarter of fiscal 2007 to reach 52 cents in the most recent period, an increase of 23.8%.
During the quarter under review, the Food and Drug Administration granted marketing approval to Viread for the treatment of chronic hepatitis B. The FDA refused to approve the inhaled version of aztreonam lysine and asked the company to conduct another study. Gilead also announced it intends to repurchase $750 million of its shares on an accelerated basis under a $3.00 billion share repurchase program announced in October 2007. Recently,
applied to the FDA for permission to make a generic version of Gilead's HIV drug, Truvada. Gilead responded with a patent infringement lawsuit that can halt generic entry for a period of up to 30 months. Investors should be aware that this and other patent-related threats can pose a significant operational risk to the company's prospects, and are always situations that require monitoring. Other risks include any other regulatory or legal affairs, as well as any government policies that are considered unfavorable to drug makers.
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.
For the fourth quarter of fiscal 2008, the company announced on February 24 that its revenue rose 13.9% year over year, surpassing the industry average of 6.3%. The increased revenue helped improve EPS, which rose 42.1% from 38 cents to 54 cents. Net income also improved in the fourth quarter, increasing 32.2% when compared to the same quarter a year ago. In addition, net operating cash flow increased significantly, rising 52.2% to $837.9 million. A further sign of Medco's strength is its return on equity, which exceed that of the prior year's quarter.
Looking ahead to fiscal 2009, Medco reaffirmed its previously announced guidance. The company anticipates fully-year 2009 GAAP diluted EPS between $2.45 and $2.55, which would represent growth of 15% to 20% over fiscal 2008 results. The stock's recent performance has been lackluster, but we feel that the company's strengths should have a greater impact than any weaknesses.
manufactures and sells cigarettes in the United States. We upgraded this stock to a
in February 2009. The new rating is supported by a variety of strengths, such as the company's revenue growth, improved margins, higher earnings, debt-free position, and sound returns.
For the fourth quarter of fiscal 2008, revenue increased 13.7% year over year, driven by higher net average selling prices, increased sales volume, and lower sales promotion costs. This increase seems to have helped boost EPS, which improved from $1.23 in the fourth quarter of fiscal 2007 to $1.53 in the most recent quarter. Net income also increased, rising 20.6% from $214 million to $258 million. The company also showed higher margins in the fourth quarter, with gross margin improving 130 basis points to 45.4% and operating margin increasing to 190 basis points to 38.1%. Lorillard remained debt-free in the fourth quarter, compared to total debt of $424 million in the prior year's quarter. An additional sign of strength for the company is that its return on equity exceeded that of the same quarter a year ago.
Management stated that the fourth quarter financial performance was the result of strong operating performance and efforts to grow Lorillard's market share. While the company has some minor weaknesses, we do not currently feel that they will have a significant impact on future financial results. Bear in mind, however, that the company faces risks from pending tobacco-related lawsuits, as well as substantial payment obligations under litigation settlement agreements. In addition, proposed cigarette regulation by the FDA could result in higher costs for Lorillard.
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 a rating alone cannot tell the whole story and should be part of an investor's overall research.