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 one of the world's largest integrated energy companies. The company is engaged in every aspect of the oil and natural gas industry, with major operations in many important gas and oil producing regions worldwide. Household products, packaging and fuel additives are made from the chemicals that Chevron produces. Chevron also works in manufacturing, marketing and transportation, along with other interests that include coal mining operations, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies. Chevron is headquartered in California, and conducts operations in more than 100 countries.
We have rated Chevron a buy since October 2003. This rating is based in part on the company's strong growth in revenue and earnings, as well as its attractive valuation levels. For the first quarter of fiscal 2008, Chevron's revenue rose 40% year over year. The company reported a net income of $5.17 billion, or $2.48 a share, compared with $4.72 billion, or $2.18 a share, in the first quarter of fiscal 2007. Additionally, net sales for the quarter were boosted by higher prices for crude oil, natural gas and refined products, growing to $64.66 billion from $46.3 billion a year ago.
The company reported that strong cash flows from operations allowed it to fund major development projects as a foundation for future growth. Bear in mind, however, that the company's performance depends largely on the movements of crude oil and natural gas prices. Any adverse changes in these prices could negatively impact revenue. Furthermore, lower sales volumes and margins on the sale of refined products could also negatively affect the company's bottom line.
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 countries worldwide, including the U.S., the U.K., Norway, Denmark, Equatorial Guinea, Gabon, Azerbaijan, Thailand and Indonesia. The company 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 the company's 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% when compared with the same quarter last year.
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 affect the company's 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 an 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% year-over-year increase. The company also improved earnings per share by 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.
Exxon Mobil's stock price has risen from where it was a year ago, with its strong earnings growth serving as a key driving factor. We believe this stock still has good upside potential in most market 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. The company's businesses include: mission-critical information systems and technologies; land and expeditionary combat vehicles, armaments and munitions; shipbuilding and marine systems; and business aviation. The company's 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 record of EPS growth and compelling growth in net income. Revenue rose 11% year over year in the first quarter of fiscal 2008. This growth appears to have boosted the company's EPS, which improved 33%. Net income also increased, rising 32% to $572 million. General Dynamics' debt-to-equity ratio was most recently very low at 0.24, implying that the company has successfully managed its 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 the fact that the company shows weak operating cash flow and potential difficulty in covering short-term cash needs.
is a worldwide oil and gas exploration and production company. The company is headquartered in El Dorado, Ark. Murphy explores for and produces crude oil, natural gas and natural gas liquids worldwide, with refining and marketing businesses in North Africa and the U.K. In the U.S., Murphy produces oil and natural gas from six fields operated by the company and three operated by others. Murphy also conducts exploration and production operations in Canada, Malaysia, Ecuador and the U.K.
Murphy Oil has been rated a buy since March 2003. Strengths include its healthy growth in net income and revenue, solid stock performance and impressive record of earnings per share growth. For the fourth quarter, the company reported year-over-year revenue growth of 91%. Skyrocketing net income was driven by higher crude oil prices and sales volume, while higher natural gas prices and an increase in the average daily production of natural gas and crude oil contributed to the improved revenue. The company reported significant EPS growth to $2.14 from 58 cents a year ago, continuing its pattern of positive earnings growth over the past two years. Additionally, Murphy Oil's stock price has surged 47% over the past year.
It is important to remember that any unexpected sharp downturn in oil and gas prices could negatively affect Murphy Oil's earnings. In addition, oil prices, which are highly volatile and cyclical in nature, are trading at record levels and could be vulnerable to weaker economic conditions. High prices may also create heightened demand for low-cost alternatives, and could thus hurt overall demand for oil and gas products.
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.