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 we focus on mid-caps.
These are stocks of companies that have market capitalizations of between $500 million and $10 billion that 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.
is an international higher education company that operates DeVry University, Ross University, Chamberlin College of Nursing and Becker Professional Review. The company has been rated a buy since January 2007. DeVry's strengths can be seen in a variety of areas, such as its impressive record of earnings-per-share growth, good cash flow from operations, robust revenue growth and largely solid financial position.
The company reported revenue growth of 21.3% year over year in the first quarter of fiscal 2009. This growth outpaced the industry average of 12.7%, and it also appears to have helped boost EPS, which improved 29.7% when compared with the same quarter last year. Net operating cash flow increased 21% to $96.8 million in the first quarter. DeVry has a very low debt-to-equity ratio of 0.2, which implies that the company has been very successful at managing its debt levels. During September 2008, DeVry completed the acquisition of U.S. Education, the parent company of Apollo College and Western Career College, which operates 17 campus locations in the western U.S.
Management stated that DeVry's strong first quarter results were driven by a strategic plan to increase enrollment through improved marketing and recruiting. The acquisition of U.S. Education also helps this strategic plan by allowing DeVry to further diversify its educational offerings. The company is confident that it should be able to continue maximizing shareholder value and achieving long-term growth goals despite a tough economy due to its diversified portfolio. It is important to remember that a quick ratio of 0.7 indicates a potential problem in covering short-term cash needs. In addition, the company shows low profit margins. All the same, we feel that the strengths detailed above are enough to outweigh any potential weaknesses at this time.
New Jersey Resources
is an energy services holding company that provides retail and wholesale energy services to customers in New Jersey, other states from the Gulf Coast to New England and Canada. Our rating for New Jersey Resources has been in place since September 2002, supported by the company's healthy revenue growth, solid stock price performance, compelling net income growth and impressive record of EPS growth.
For the fourth quarter of fiscal 2008, the company reported revenue growth of 40.1% year over year, which outpaced the industry average of 22.6%. Revenue growth appears to have helped boost EPS, which rose significantly from a loss of 91 cents per share in the fourth quarter of fiscal 2007 to a profit of $1.86 in the most recent quarter. Net income surged 305.1% when compared with the same quarter a year ago. In addition, the company announced that its Board of Directors recently approved a 10.7% dividend increase, bringing the quarterly dividend rate to 31 cents per share. The company has paid quarterly dividends continuously since it began in 1952.
Looking ahead to fiscal 2009, New Jersey Resources forecasts net financial earnings in the range of $2.30 to $2.40 per basic share. Approximately 30% to 40% of those earnings are expected to come from the company's wholesale energy services subsidiary, NJR Energy Services. The company shows low profit margins, but we feel that its strengths outweigh any potential weakness at this time. Strong earnings growth has helped the stock price rise over the past year, and the stock should see more upside potential unless a broad bear market prevails.
is a biopharmaceutical company that engages in the research, development and commercialization of pharmaceutical products for the anti-infective market. We upgraded Cubist from a hold to a buy in October 2008. Our rating is supported by a number of strengths, such as its robust revenue growth, solid stock price performance, and expanding profit margins. Growth in net income and EPS also contribute to the company's strengths.
The company reported 40.9% year-over-year revenue growth in the third quarter of fiscal 2008, contributing to an EPS improvement of 37.5%. EPS climbed from 32 cents in the third quarter of fiscal 2008 to 44 cents in the most recent quarter. The company has, in fact, demonstrated a pattern of positive EPS growth over the past two years, and we feel that this trend is likely to continue. Net income also increased in the third quarter, increasing 39.5% from where it was a year ago. Although Cubist's gross profit margin is very high at 79.1%, it has managed to decrease that result compared to the prior year's quarter. In addition, the company's net profit margin of 24.8% compares favorably with the average for the biotechnology industry.
The stock price is not only higher than it was a year ago, but it also outperformed the
over the same period of time. Strong earnings growth appears to have been key to this growth, although other factors clearly played a role as well. Although even the best stocks can fall in an overall down market, we feel that this stock still has good upside potential under any other market conditions. Although no company is perfect, we do not currently see any significant weaknesses that are likely to detract from Cubist's generally positive outlook.
processes and markets culinary, snack, in-shell and ingredient nuts. We upgraded Diamond Foods from a hold to a buy in July 2008 on the basis of the company's impressive record of EPS growth, increases in revenue and net income and largely solid financial position.
For the fourth quarter of fiscal 2008, the company reported that its revenue increased slightly, rising 0.6% year over year. However, net income grew significantly, surging 240.3% from $770,000 million in the fourth quarter of fiscal 2007 to $2.6 million in the most recent quarter. EPS improved from 5 cents to 16 cents, and we feel that the company should be able to continue its trend of positive EPS growth seen in the past year. Diamond has a very low debt-to-equity ratio of 0.14, which implies that the company has successfully managed its debt levels. In addition, the company appears to be able to avoid any short-term cash problems. During the quarter, the company took steps to place its snack business in a better position in the market by introducing new products and adding new distribution in key markets. As a result, snack sales improved 3%, finishing the year 11% higher than full-year fiscal 2007 results. Culinary sales grew 39% in the quarter and 1% for the full year compared to last year.
Based on its fourth quarter and full-year fiscal 2008 results, the company released guidance for the year ahead. Management anticipates full-year EPS in the range of $1.20 to $1.27, with net sales expected to be between $585 million and $615 million. Although the company shows low profit margins, we feel that the strengths detailed above outweigh any potential weakness exhibited by Diamond at this time.
Church & Dwight
develops, manufactures, and markets household, personal care, and specialty products under well-recognized brand names such as Arm & Hammer, Brillo, Kaboom, OxiClean and Trojan. We have rated Church & Dwight a buy since November 2001.
For the third quarter of fiscal 2008, Church & Dwight reported that its earnings declined 5.3% year over year in the third quarter of fiscal 2008, hurt by higher operating expenses. Although net income fell to $49 million from $51.7 million in the prior year's quarter, earnings were reported at 73 cents per share excluding restructuring charges related to a plant closing, beating the consensus estimate of 69 cents per share. Net sales grew 8.7% compared with the third quarter of fiscal 2008. Revenue growth was reported across various businesses, including 9.7% growth from the Consumer Domestic segment and 4.3% growth from the Consumer International segment. According to the company, price increases, new products and increased distribution on key brands helped drive organic revenue growth in the quarter.
Looking forward to full-year fiscal 2008, the company reconfirmed its EPS guidance to a range of $2.83 and $2.85, which would represent a 15% to 16% increase over fiscal year 2007. The company also reconfirmed its forecast of organic revenue growth beyond 3% to 4%. Management announced that it was pleased with the organic revenue growth, increasing gross margin, tight management of overhead costs, and increased marketing spending during the third quarter. Bear in mind, however, that failure to achieve revenue from new products and increased prices may pose a threat to Church & Dwight's future financial performance. In addition, a decrease in demand for the company's products due to the slowdown in the U.S. economy could negatively impact revenue growth.
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 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.
This article was written by a staff member of TheStreet.com Ratings.