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.
is a global independent energy company that explores for, produces, purchases, transports and sells crude oil and natural gas. The company conducts exploration and production activities in the U.S., the U.K., Norway, Denmark, Equatorial Guinea, Gabon, Azerbaijan, Thailand and Indonesia. It also manufactures, purchases, trades and markets refined petroleum and other energy products. Hess operates approximately 1,250 retail facilities in the eastern U.S., along with a convenience store network.
We have rated Hess a buy since August 2004 due to a variety of strengths. Propelled by price increases for natural gas, natural gas liquids and oil, the company's total revenue and non-operating income for the first quarter of fiscal 2008 rose 45% year over year. An increase in average daily production of natural gas and crude oil also contributed to the improvement in total revenue and non-operating income. Hess also announced that its first quarter net income surged to $759 million from $370 million a year ago, again due to higher crude oil prices and increased production. Additionally, net operating income increased significantly in the first quarter, rising 84% from a year ago.
While oil prices are currently trading at record levels, these prices are also highly volatile and cyclical in nature. Because Hess generates a significant portion of its income from the production of oil and gas, any significant unexpected downturn in oil prices could negatively impact earnings. Such a downturn could occur if high oil prices generate higher demand for low-cost alternatives or if the slowdown in the U.S. economy and weakness in the U.S. labor market put further pressure on the demand for oil and gas products.
is a multinational energy company that maintains operations in more than 130 countries. Together with its subsidiaries, it engages in all aspects of the petroleum industry, including both upstream (oil and gas exploration, development and production, liquefied natural gas) and downstream (refining, marketing, trading and shipping crude oil and petroleum products) operations. The company also produces base chemicals such as petrochemicals and fertilizers, cholorochemicals, performance polymers and specialty chemicals for the industrial and consumer markets. Additionally, Total has interests in the coals mining and power generation.
Total has been rated a buy since September 2004, showing strengths in increased net income, a solid stock performance, and a remarkable record of EPS growth. For the first quarter of fiscal 2008, Total reported net income of 3.6 billion euros, which reflects an increase of 18% year over year. Continuing its pattern of positive earnings growth, the company's adjusted EPS expressed in dollars increased 26% when compared with the first quarter of fiscal 2007. Total attributes its recent quarterly performance to its upstream segment. Additionally, the company benefitted from the ramp-up of the Dolphin project in the Middle East and the continued increase in production at the Dalia and Rosa fields in Angola. Furthermore, Total made plans to further strengthen its position in the Canadian heavy oil market by launching a public offering to buy Synenco.
Total expressed a positive outlook going forward, as oil prices continued to rise at the beginning of the second quarter of fiscal 2008. Bear in mind, however, that a number of risk factors could affect Total's future results, including fluctuations in currency or the price of petroleum products, environmental regulatory considerations and general economic conditions.
is a publicly traded international oil and gas company. Its primary business involves the exploration for and production of crude oil and natural gas, the manufacture of petroleum products, and the transportation and sale of crude oil, natural gas and petroleum products. The company, along with its divisions and affiliates, operates and markets products in the U.S. and about 200 other countries and territories. Exxon Mobil explores for oil and natural gas on six continents. The company also holds interests in electric power generation facilities, and its affiliates conduct extensive research programs in support of all of the company's businesses.
Our buy rating for Exxon Mobil has not changed since January 2004. The company's strong revenue and net income growth, along with a largely solid financial position, have contributed to this rating. Exxon Mobil reported record net income of $10.89 billion in the first quarter of fiscal 2008, reflecting a 17% increase year over year. The company also improved earnings per share 25% in the first quarter due to strong earnings and the reduction of outstanding shares. Since the same quarter one year ago, Exxon Mobil's revenue rose 36%. Based on its low debt-to-equity ratio of 0.08, the company appears to have been very successful at managing its debt levels to date.
Shares have risen in the past year. Strong earnings growth was a key factor. We believe this stock still has good upside potential in most environments other than an overall down market. However, it is important to remember that the company's performance largely depends on the movement of crude oil and natural gas prices, and any adverse pricing changes could therefore negatively impact future results.
designs, develops, manufactures and supports technology, products and services for use across the spectrum of military operations. Businesses include: mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation. Products are as diverse as nuclear submarines, targeting systems, tactical Personal Digital Assistants and Gulfstream business-jet aircraft. In addition, a small resources group operates two underground coal mines and several stone quarries, as well as sand and gravel pits and yards.
Our buy rating for General Dynamics has not changed since July 2003. This rating is based on strengths such as revenue growth, an impressive EPS improvement and compelling growth in net income. Revenue rose 11% year over year for the first quarter of fiscal 2008. This growth appears to have boosted EPS, which improved 33%. Net income also increased 32% to $572 million. General Dynamics' debt-to-equity ratio is very low at 0.24, implying successful management of debt levels.
While the stock is trading higher than it was a year ago, it should go without saying that even the best stocks can fall in an overall down market. We believe that the company's strengths outweigh weak operating cash flow and potential difficulty in covering short-term cash needs.
provides products, technologies, solutions and services to individual consumers and businesses worldwide. Offerings include enterprise storage and servers, personal computing, multivendor services, imaging and printing. H-P's Personal Systems segment produces, among other products, commercial and consumer PCs based predominantly on the Windows operating system. These products use
Our buy rating for Hewlett-Packard has not changed since November 2004 and is based on robust top-line and bottom-line growth, margin expansion and attractive returns. Total revenue for the first quarter of fiscal 2008 grew 14% year over year, aided by surging laptop sales and continued demand for printer ink. Cost control measures and lower component costs helped the company to improve gross profit margin and operating margin 91 basis points and 140 basis points, respectively, from the year-earlier quarter. Gross profit margin was reported at 26%, while operating margin was 9.2%. H-P also reported improved returns, with return on assets increasing to 8.9% from 8% and return on equity rising to 21% from 17%.
For fiscal 2008, Hewlett-Packard raised its guidance based on anticipated cost reductions and gain in its market share. The company expects revenue to range between $27.7 billion and $27.9 billion for the second quarter of fiscal 2008. However, despite rising revenue and earnings, the company faces challenges from rising debt levels and stiff competition. Additionally, exposure to emerging markets is forcing the company to lower its prices in order to protect market share.
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 impact 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.