Each week, 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 -- and publishes these lists in the Ratings section of our Web site.
This list, last updated Nov. 30, is 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.
Top 5 Fast-Growth Stocks
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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.
L-3 Communications Holdings
, a military-equipment company, has been rated a buy since October 2005.
Third-quarter net income rose 21% over a year ago to $199 million, or $1.56 a share. Revenue increased by 11.1% to $3.45 billion during the same period, outpacing the industry average of 8.5%. L-3's earnings per share grew by 19.1%, and the company's stable EPS growth over the past year indicates that it has sound management over its earnings and share float. Its net operating cash flow rose 24.41% to $324.10 million during the third quarter compared with the same period last year.
Encouraged by a strong performance during the first nine months of 2007, a healthy backlog position and a favorable industry outlook, L-3 Communications raised fiscal 2007 guidance to be in the range of $5.86 to $5.90 a share, up from an earlier view of $5.72 to $5.82 share. The company also said it expects 2008 earnings to be within the range of Wall Street's expectations. Though the company's stock price has risen in the last 12 months, it should continue to move higher.
, an integrated oil and gas company, has been rated buy since September 2005. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, EPS growth, increase in net income and attractive valuation level.
Total's revenue growth outpaces the industry average, driving higher earnings. Total has demonstrated a pattern of positive EPS growth over the past year, a trend that should continue. Third-quarter net profit climbed 29% to $4.54 billion, while sales rose 3% to $57.36 billion.
Even though it has already enjoyed a nice gain the past year, Total's stock should continue to move higher. The company has demonstrated a pattern of positive earnings per share growth over the past year, and this trend is expected to continue. These strengths are expected to outweigh the company's low profit margins.
, which makes motion and control technologies and systems, has been rated a buy since October 2006. Its fiscal first-quarter net income increased 9% from a year ago to $229.60 million or $1.33 a share, bolstered by strong sales growth in its industrial, international and aerospace segments. Revenue increased by 9.2% to $2.79 billion over the same time frame, driven by a mix of organic growth, strategic acquisitions and positive foreign currency exchange rates.
Parker-Hannifin's return on equity climbed 217 basis points to 18.68%, and cash and cash equivalents rose 6.9% to $187.92 million. However, the company suffers from a declining operating margin as well as a high debt level. In addition, a significant portion of its revenue comes from customers outside the U.S., leaving it susceptible to adverse foreign policy and currency fluctuations.
Public Service Enterprise Group
sells electricity and natural gas primarily in the northeastern and mid-Atlantic U.S. It has been rated a buy since November 2006.
The company recently settled with the regulatory authority in New Jersey in an agreement that provides a 1.1% -- or $40 million -- hike in the annual natural gas base rate and an adjustment to lower depreciation and amortization expenses by $39 million annually over the next five years. Public Service generates 53.2% of its operating income from the power segment, with increased income driven by higher realized prices, increased power generation and lower generation costs.
The rating is not risk-free. Public Service Enterprise Group is exposed to risks arising from the reliability of power plants and transmission and distribution equipment, along with related safety hazards. In addition, the company could be negatively affected by regulatory changes.
, a technology products and services company, has been rated a buy since September 2005 on the basis of growing revenue, strong cash flow and expanding margins.
Fourth-quarter profit climbed 28% from a year ago to $2.16 billion, or 81 cents a share driven by a strong performance across its business segments. Revenue increased 15% to $28.29 billion, primarily bolstered by surging laptop sales and continued demand for highly profitable printer ink. For the year, Hewlett-Packard's net income grew 17.2% to $7.26 billion, on revenue growth of 13.8% to $104.29 billion.
The company has agreed to acquire the Atos Origin Middle East group, or AOME. As one of the Middle East's leading systems integrators, AOME is expected to broaden the company's consulting and integration capacity in the region. Also, Hewlett-Packard purchased specialty computer maker Neoware for $16.25 a share or $334 million. On the downside, intense competition in the computer and printer market as well as rising debt levels are downside risks to the buy rating.