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 we focus on mid-caps. These are stocks of companies that have market capitalizations of 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.
engages in the development, manufacture, and sale of precision-engineered flow equipments through three 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 a buy since January 2007 based on robust revenue growth, good cash flow from operations and expanding profit margins. Flowserve's revenue rose 19% year over year for the third quarter of 2007. The company also reported earnings per share of $1.10, vs. 49 cents a share in the year-ago quarter. Furthermore, net operating cash flow has increased 1548% to $106.8 million year over year, 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.
manufactures and sells automated irrigation systems. These systems help the agricultural industry increase or stabilize production while conserving water, energy and labor. Lindsay's principal manufacturing facilities are located in Lindsay, Neb., but the company also has foreign sales and production facilities in France, Brazil, and South Africa, providing it with important bases of operation in key international markets.
The company has been rated a buy since March 2007, based on robust revenue and net income growth coupled with a solid financial position. Revenue rose 47% year over year for the first quarter of 2008 to $75.9 million. Net income increased 145% during the same period to $4.4 million.
Powered by earnings growth of 140% and other important factors, the stock has surged 92% over the past year. While this sharp appreciation has put the stock at a premium over the rest of the industry, we feel that other strengths justify the high level. Furthermore, management expects higher domestic demand for its products during the irrigation selling season, and predicts an increase in international demand on the strength of higher agricultural prices.
Helmerich & Payne
drills oil and gas wells for others. The company's primary markets are the international land rig business and the U.S. offshore platform rig business. The company also owns, develops, and operates commercial real estate within the metropolitan area of Tulsa, Okla.
We have rated Helmerich & Payne a buy since December 2004. Our rating is based on the company's strong growth in revenue and its healthy cash position. During the first quarter of 2008, the company's total revenue increased 18% to $456.7 million, fueled by impressive performance in its U.S. Land segment. The company's cash and cash equivalents soared 33% to $97.5 million.
Additionally, Helmerich and Payne has reasonable leverage levels. The company focuses on several key strengths, such as using the newest and best rig technology to keep drilling costs down for its customers and managing its rig assembly process in-house to remove delays from third-party rig fabricators from its rig-delivery equation.
Looking forward, the construction of new FlexRigs to be deployed in the U.S. and Latin America contributes to a positive business outlook for the company. In addition, it anticipates margins per day to improve in the second quarter of 2008. However, the company's operating margin and earnings declined during the quarter under review, along with stiff competition and unfavorable weather conditions, may hurt profitability in the upcoming quarters.
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 a buy since May 2004.
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 over the same period last year to 47.20%, while operating margin increased 187 basis points to 19.30%. Net income was $22.98 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 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. However, merger-related challenges remain. Any failure to retain or hire additional qualified professionals in the wake of former employees joining the competition could negatively affect the stock's performance.
( AXYS), which until recently was one of our top-rated small-cap stocks, has recently crossed the threshold into the mid-cap category. The company designs and manufactures precision optical solutions (such as thermal imaging cameras, stabilized camera systems, motion control systems, and scanning systems) for use by the U.S. government and high-performance commercial markets in aerospace, defense, and other applications. Axsys also distributes precision ball bearings used in a variety of industrial and commercial applications. The company's corporate offices are located in Connecticut, with design and manufacturing facilities based in a number of other states.
We have rated Axsys a buy since November 2005. In the fourth quarter of 2007, the company recorded strong financial performance, with strong demand for both Axsys' traditional business and the recently acquired gyro-stabilized gimbal business helping generate revenues of $47.9 million, compared to $33.8 million in the fourth quarter of 2006. Sales increased 42% year over year to a record $47.9 million. The company reports that its backlog increased to a record $140 million, which is a 21% increase compared to the fourth quarter of 2006. This increase was due to strong demand for infrared cameras and lenses, gimbal systems and military-grade motion control systems.
Looking ahead for full-year 2008, management now expects to generate sales in the range of $208 million to $212 million, up from the previously forecast $193 million to $197 million range. Management also expects diluted earnings per share to be in the range of $1.70 to $1.75, up from the previous guidance of $1.57 to $1.60. However, any significant reduction or delay in purchase of the company's products by the U.S. government could have an adverse effect on Axsys' financial performance, as the company derives a significant portion of its revenue from this source.
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.