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 0.21, 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.
is a biopharmaceutical company that engages in the research, development, and commercialization of pharmaceutical products for the anti-infective market. We recently upgraded Cubist from a hold to a buy on Oct. 17. 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 to the average for the biotechnology industry.
The stock price is not only higher than it was a year ago, but it also outperformed the S&P 500 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.
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 to 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.
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 $48.99 million from $51.72 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 to 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.
provides technologies and solutions for mission-critical national security programs for the intelligence community, the space community and various departments and agencies of the U.S. federal government. ManTech has been rated a buy since March 2005. Our rating is based on strengths such as the company's robust revenue growth, largely solid financial position and record of EPS growth.
For the third quarter of fiscal 2008, revenue rose by 26.8% year over year. This increase was primarily the result of a business strategy focused on high-end defense and intelligence markets supporting U.S. national security. Revenue growth appears to have helped boost earnings per share, which improved 31.4% when compared to the same quarter a year ago. The EPS increase from 51 cents to 67 cents represents the continuation of a pattern of positive EPS growth demonstrated by ManTech over the past two years, a trend which we feel should continue. Net income also increased in the third quarter, rising from $17.48 million in the third quarter of fiscal 2007 to $23.86 million in the most recent quarter. ManTech's very low debt-to-equity ratio of 0.007 and quick ratio of 1.42 illustrate the company's successful management of debt levels and ability to avoid short-term cash problems.
Management announced it was pleased with the third quarter results, as strong performance and excellent cash flow helped provide necessary flexibility in a challenging economic environment. Based on strong business momentum in its national security and defense business, the company set EPS guidance at 67 cents to 70 cents for the fourth quarter and $2.53 to $2.56 for full-year fiscal 2008. These ranges represent 10% to 15% growth over the fourth quarter of fiscal 2007 and 30% to 31% growth over full-year fiscal 2007. The company currently shows low profit margins, but we feel that the strengths detailed above outweigh any potential weakness.
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.