Each weekday, 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, updated daily, is based on data from the close of the previous trading session. Today, large-cap stocks are in the spotlight. These are stocks of companies with market capitalizations of more than $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.
Leading the list today is
, which makes navigation, communications and information devices based on GPS technology. It has been rated buy since August 2005. The company has shown outstanding revenue growth, notable return on equity and a two-year pattern of steady increases in EPS, and it is carrying no debt.
These strengths outweigh the fact that Garmin is trading at a premium valuation according to TheStreet.com Ratings' review of its current price compared with factors such as earnings and book value.
Oilfield services company
has been rated buy since June 2005. The company has demonstrated a pattern of positive EPS growth over the past two years, a trend TheStreet.com Ratings expects to continue. Its net income increased by 63.4% in the first quarter of 2007 when compared to the same period last year, outperforming both the
and its industry.
Schlumberger also shows a strong gross profit margin and improved return on equity, a clear sign of strength within the company. Although Schlumberger may have some minor weaknesses, they are unlikely to have a significant impact on results.
Air Products and Chemicals
, a chemical and gas producer, has been rated buy since August 2005, based on the company's strong revenue growth, increasing net income, expanding operating margin and improved return on equity. In July, Air Products and Chemicals said that third-quarter sales surged 15.6% to $2.6 billion. Earnings climbed 36% to $284.9 million, or $1.28 a share, sparked by higher sales volume and expanding operating margins boosted net income.
Return on equity for the quarter improved 136 basis points to 16.61%, sparked by the increase in net earnings. Risks to the buy rating include challenges associated with integrating acquisitions and an unfavorable effect of currency fluctuation.
Freeport-McMoRan Copper & Gold
engages in the exploration, mining and production of copper, gold and silver. It has been rated buy since July 2005. Despite a correction in copper prices in July, the long-term industry outlook remains strong, supported by the growing industrialization of China and India. The company's acquisition of Phelps Dodge resulted in a more than threefold year-on-year growth in revenue for the second quarter, to $5.81 billion.
Freeport-McMoRan has ongoing significant development activities to expand its copper production, extend mine lives and develop large-scale underground ore bodies. The stock is not risk-free, however. Any unexpected slowdown in copper demand could lead to an inventory pileup and result in lower copper prices. This, when coupled with higher cost of consumables and energy, could further build pressure on Freeport's operating margin and affect its profitability.
, which makes motion and control technologies and systems, has been rated buy since October 2006. The company's revenues and net income for the third quarter of fiscal 2007 were both up over the year-earlier period, driven by better sales in most of its business segments. Parker-Hannifin also posted higher return on equity for the quarter. There was also an improvement in debt-to-equity ratio, which demonstrates financial stability.
The company has recently been involved in a series of acquisitions, notably those of Airtek, Rectus AG and Rayco Technologies. There are potential risks, however. Parker-Hannifin operates in a highly competitive environment, and its growth is partly dependent on the continued development of new products and technologies. A significant portion of the company's revenue comes from customers outside the U.S., which leaves it vulnerable to international political risk as well as currency risk.