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 those lists in the Ratings section of our Web site.
This list is based on data from the close of the previous trading session. Today we focus on mid-caps. These are stocks of companies that have market capitalizations between $500 million and $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.
is an international higher education company that owns and operates DeVry University, Ross University and Becker Professional Review. The company has been rated buy since January 2007.
DeVry's strength's can be seen in a variety of areas, such as its impressive record of earnings-per-share growth, compelling growth in net income and revenue, and largely solid financial position. For the second quarter of 2008, DeVry reported EPS of 49 cents, compared with 23 cents a year ago. This increase is part of a demonstrated pattern of EPS growth over the past two years, a trend we feel should continue. The company's second-quarter net income of $35.8 million represents an increase of 118% when compared with the same quarter one year prior. DeVry has no debt to speak of, and its revenues rose by 16% in the second quarter.
Powered by its strong earnings growth of 113%, this stock has surged by 63% over the past year. While the stock's sharp appreciation has driven it to a price level that is somewhat expensive compared with the rest of its industry, we feel that DeVry's strengths justify the higher price at this time.
provides consulting services to organizations confronting legal, financial and reputational issues. The company has capabilities in specialized industries, including telecommunications, health care, pharmaceuticals and utilities. The company has offices in 25 U.S. cities, as well as London, England and Melbourne, Australia. FTI Consulting has been rated buy since November 2005.
Our recommendation is based on the company's strong revenue and net income growth, expanding margins, higher returns and positive outlook. Third-quarter 2007 revenue jumped 56% year over year to $253.3 million. Gross profit margin expanded 170 basis points to 47.20%, while operating margin increased 187 basis points to 19.30%. Net income was $23 million, or 50 cents a share, vs. a net loss of $290,000, or a penny a share, in the third quarter of 2006.
During the quarter, FTI Consulting closed a public offering of 4.83 million shares of its common stock at $50.00 a share. Net proceeds from the offering were $232 million, which will be used for general corporation purposes, including the continuation of its strategic acquisition program.
Looking forward, the company reiterated its fiscal 2007 EPS estimate in the range of $1.92 to $2.00. However, merger-related challenges and the company's failure to retain or hire additional qualified professionals as former employees join the competition could negatively affect the stock's performance.
engages in the development, manufacture and sale of precision-engineered flow equipments through 3 divisions: Flowserve Pump, Flow Control and Flow Solutions. The company operates worldwide, with 43% of its revenues coming from North America.
We have rated Flowserve buy since January 2007. This is based on a convergence of positive investment measures, such as robust revenue growth, good cash flow from operations and expanding profit margins. Flowserve's revenues rose 19% year over year for the third quarter of 2007. The company also reported EPS of $1.10, compared with 49 cents in the third quarter of 2006. Furthermore, net operating cash flow has significantly increased by 1548.13% to $106.8, and the company has a gross profit margin of 36%, which we consider strong.
The recent surge in commodity costs is a challenge to the machinery industry. This could affect Flowserve's results in the future.
provides rendering, recycling, and recovery solutions to the food industry, processing animal byproducts and used cooking oil into meat and bone meal, tallow, and yellow grease. The company also provides grease-trap cleaning services to food-service establishments. Darling operates 24 facilities throughout the U.S., as well as a fleet of nearly 640 trucks and tractor-trailers to collect raw materials. Darling markets its finished products worldwide to producers of oleo-chemicals, soaps, pet foods, and livestock feed.
We have rated Darling buy since January 2007. Boosted by higher finished goods costs and increased raw material volumes, Darling's revenue grew 49% year over year in the third quarter of 2007 to $171.8 million. Gross profit margin and operating margin expanded to 24% and 12%, respectively. Consequently, net income for the third quarter increased more than six fold to $12.1 million, or 15 cents a share, from $1.8 million, or 2 cents a share. Darling recently transferred its common stock from the American Stock Exchange to the New York Stock Exchange.
Additional regulations on the use of feed by the Food and Drug Administration could adversely affect the company. In addition, the company may fail to achieve the benefits expected from its acquisition of National By-Products.
provides home health and hospice services in the southern and southeastern U.S. The company provides a wide variety of health care services, including skilled monitoring by registered nurses, occupational and physical therapy, assessments and patient education.
Based primarily on the company's robust top-line performance and expansions to both margins and the bottom line, we have rated Amedisys buy since January 2005. Amedisys also has strong liquidity and low leverage. For the third quarter of 2007, the company's cash and cash equivalents grew seven fold to $72.5 million, while its debt-to-equity ratio improved significantly to 0.06 from 0.21 a year ago.
Amedisys has a strong outlook thanks to recent acquisitions. During the third quarter, the company acquired IntegriCare to strengthen its Home Health and Hospice Care service segments. Bear in mind, however, that the company's revenue and earnings could be affected by any adverse changes in Medicare rates and reimbursement methodologies, or any challenges related to the integrations of the recent acquisitions.
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.