Each weekday, TheStreet.com Ratings compiles a list of the top 10 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.Today we look at fast-growth stocks. These are stocks of companies that are projected to increase revenue and profit by at least 12% in the coming year and rank near the top all stocks rated by our proprietary quantitative model, which looks at over 62 factors. In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. Please note that definitions of revenue vary by industry, and this screen does not make adjustments for acquisitions, which can materially affect posted results. Likewise, earnings per share growth may be affected by accounting charges, share repurchases and other one-time items. We begin with Albemarle ( ALB - Get Report), which develops, manufactures and markets specialty chemicals around the world. It has been rated a buy since December 2004. The company's strengths include third-quarter revenue growth of 20% compared to the same period a year ago, a net cash flow from operations increase of 59.36%, return on equity of 10.9%, solid stock price performance, and reasonable debt levels. These strengths outweigh the fact that the company has had subpar growth in net income. That notwithstanding, it is poised for EPS growth from $2.41 to $3.75 in 2007.
Precision Castparts ( PCP) manufactures metal components and products for aerospace and industrial gas turbine applications. It has been rated a buy since December 2004. The company is expected to benefit from its recent acquisitions and capacity expansion plans. This, together with higher defense spending worldwide, may allow it to repeat its recent strong financial performance. TheStreet.com Ratings believes increased defense spending, combined with the ongoing rebound in aviation, could increase the demand for Precision's products. However, because the company's top-line growth depends on the aerospace industry, any slowdown in the sector could lead to reduced demand for parts, components and supplies. Also, fluctuation in the prices of basic materials and the company's inability to successfully integrate acquisitions are concerns.
Real estate and money management service company Jones Lang LaSalle ( JLL - Get Report) has had a buy rating since December 2004. The company boasts a number of impressive strengths, including a return on equity in the third quarter of fiscal 2006 that exceeded its return on equity of a year ago (a sign of internal strength), revenue growth of 41.6% for the quarter compared to last year (nearly double that of the industry average), and EPS growth of 19.7% for the quarter. JLL's positive EPS has shown a pattern of reliable increases for the last two years, seen most clearly in its share price, which rocketed upward 80% during 2006. With positive investment measures across the boards, the company's low profit margins and decreasing liquidity are nothing to be overly concerned about.
Volvo ( VOLV) sold its automobile business to Ford in 1999, but its success in manufacturing trucks, buses, construction equipment and aircraft engine parts has earned a buy rating since January 2005. The stock has surged by 51% during the 12-months since January 31, 2006, driven by EPS growth of 33% in the third quarter of 2006 when compared to the same period the previous year, continuing its pattern of strong EPS growth during the past two years. In that same quarter, net income grew by 34.4% to $520.48 million when compared to that period a year ago, outperforming the S&P 500 and dwarfing the machinery industry average. The company's weak operating cash flow isn't enough to threaten the company's buy rating, given its other strengths.
A buy since December 2004, SEI Investments ( SEIC - Get Report) provides outsourced business services to manage wealth for the financial services industry. The company's third-quarter revenue jumped 53.9% compared to the same period the previous year, and its gross profit margin of 45% during that time frame demonstrates good performance. With its debt-to-equity ratio of 0.15 well below the industry average, SEI displays very successful debt management. Even though its stock price, which increased 58% in 2006, is at a premium based on TheStreet.com's Ratings review of earnings and book value, the company's financial strengths position it for continued growth.
Lincoln Electric ( LECO - Get Report), which manufactures and re-sells welding and cutting products, has been rated a buy since December 2004. The company has demonstrated a pattern of positive earnings-per-share growth over the past two years as of Jan. 3, and TheStreet.com Ratings expects this to continue. Along with a favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.13, which illustrates the ability to avoid short-term cash problems. Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 51% over the past year.
Russia-based dairy products and beverages manufacturer Wimm Bill Dann Foods ( WBD) has earned a buy rating since December 2005. When compared to the same period in the previous year, the company's net income growth of 44.2% to $19.44 million in the third quarter of 2006 is striking, and the same quarter, net operating cash flow soared by 133% to $16.37 million compared to the same period last year, which is impressive enough even without noting the 24.9% drop in average cash flow growth in the food products industry. Wimm Bill Dann also sports a strong gross profit margin of 37.8%, although its net profit margin of 4.4% lags the industry average. Revenue growth of 27.6% during the quarter compared to the year before contributed to an EPS increase of 46.7%, sustaining a two-year pattern of positive EPS growth.
Danish pharmaceutical company Novo Nordisk ( NVO) has carried a buy rating since January 2005. The company showed successes in 2006, with net income increasing 22.7% and revenue growth of 26.84% compared to the year before. These strengths helped boost EPS by 25.17% for the year, including a whopping 90.9% in the fourth quarter compared to the same period in 2005. Although the stock's 53.78% rise for the year makes it relatively expensive compared to industry peers, it is justified given its 2006 achievements. Despite having shown a pattern of positive EPS growth in the past two years, TheStreet.com Ratings expects relative underperformance in this pattern in 2007 when the market anticipates a 1.7% contraction in earnings -- $3.47 compared to 2006's $3.53.
Rated a buy since September 2004, Lincoln National ( LNC) runs insurance and investment management businesses through its various subsidiaries. Acquiring Jefferson-Pilot Corporation in April 2006, one of the largest life insurance companies in America, made Lincoln an industry leader across all of its product lines and should create annualized pretax savings of $180 million starting from the third year of the acquisition. Lincoln's strong market share, cash flow, revenue growth and reliable demand from the baby-boomer generation position it for steady earnings growth. Potential risks to the buy rating include any adverse regulatory actions, any excessive decrease in the equity market that causes account values to decline, or unanticipated integration problems related to the Jefferson-Pilot acquisition.
Prologis ( PLD) is a REIT that owns, manages and develops 2,340 properties in North America, Europe and Asia. The company has warranted a buy rating since February 2005. Prologis has displayed a pattern of EPS growth over the past two years, including a 15.0% improvement in the fourth quarter of 2006 compared to the same period the previous year. That quarter also saw net income growth of 27.2%, increasing from $135.76 million to $172.66 million. The company's shares increased 25.66% in 2006, outperforming the S&P 500 Index, and with no major weaknesses it is positioned to continue its ascent.