Each business day, 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 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.
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.
Rated a buy since December 2005,
Telmex-Telefonos de Mexico
provides fixed-line telephony services in Mexico, the U.S. and numerous countries in Latin America. It maintains a largely solid financial position with reasonable debt levels by most measures, revenue growth and a pattern of EPS growth over the past two years that is likely to continue.
In the year prior to Dec. 14, Telmex's stock price increased by 32.79%. This stock still has good upside potential and it should continue to move higher. Although no company is perfect, TheStreet.com Ratings does not see any significant weaknesses that are likely to detract from the generally positive outlook.
Competition in the industry has intensified over the last decade due to the entry of cable companies in the telephone services sector. Declining service prices, coupled with the introduction of new technologies to improve the overall service quality, are enabling the wireless companies to rapidly add new customers. As a result, wireline companies are losing ground to wireless as well as cable companies.
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. Third-quarter profit climbed 35.2% from a year ago to $507 million, or $1.97 a share.
Public Service Enterprise Group generates 67.6% of its operating income from its power segment, which grew 63.3% in the third quarter when compared with the same period last year. The growth was powered by higher prices realized, an increase in power generation and lower generation cost. The company has also seen an increase in generating capacity from its nuclear power plants.
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.
, an integrated oil and gas company, has been rated buy since December 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 income climbed 62.8% to $4.89 billion compared with the same period last year, while revenue rose 26.1% over the same time frame. Even though it has already enjoyed a nice gain in the past year, Total's stock still shows upside potential. These strengths outweigh the company's low profit margins.
, a technology products and services company, has been rated a buy since December 2005. The rating is based on the company's strong top- and bottom-line growth as well as its expanding margins. These positives are further supported by notable returns, reasonable leverage levels, and growth due to strategic acquisitions.
Fiscal-year fourth-quarter net income climbed 27.5% 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 strong sales across all of the company's business segments.
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 digital inkjet printer company MacDermid ColorSpan.
Risks remain. Despite rising earnings and revenue, the company faces challenges from rising debt levels and stiff competition. Furthermore, exposure to emerging markets is forcing the company to lower its prices in order to defend market share. As a result, Hewlett-Packard's margins could deteriorate in the future.
has been rated a buy since October 2005. The company's diversified business model and growth initiatives leave it well-positioned to gain from positive trends in the railroad industry. Third-quarter profit climbed 27% over a year ago to $532 million, or $2 a share.
Union Pacific serves a broad range of customers, putting the company in a strong competitive position and making it less vulnerable to softness in the housing and auto industries. Tightness in trucking capacity due to a driver shortage, increased highway congestion and higher fuel prices have resulted in higher demand for rail transport recently. Also, with double-stacked railcars and computer-guided systems, railroads are becoming more competitive than trucks.
On the down side, Union Pacific's business is cyclical in nature and sensitive to changes in economic conditions. Therefore, severe weather, currency volatility and higher-than-expected fuel prices could hurt Union Pacific's financial performance, and a recent change in Illinois tax law could increase the company's future income tax liability.
Our quantitative ratings are based on a variety of historical fundamental and pricing data and represent our opinion of a stock's risk-adjusted performance relative to other stocks.
However, they do not incorporate all of the factors that can alter a stock's performance.
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.