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. Flowserve ( FLS - Get Report) develops, manufactures and sells 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 a 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. 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 in the year-ago quarter. Net operating cash flow significantly increased to $106.8 million, and the company has a gross profit margin of 35.9%, 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. Sigma-Aldrich ( SIAL) develops, manufactures and distributes a broad range of quality biochemicals and organic chemicals. These products and kits are used in scientific and genomic research, biotechnology, pharmaceutical development and the diagnosis of disease. They are also used as key components in pharmaceutical and other high-technology manufacturing. The company operates in 35 countries, with chemical production facilities in Australia, Canada, France, Germany, India, Japan, Singapore, Switzerland, the U.K. and various U.S. states. Our buy rating for Sigma-Aldrich has been in place since November 2003. The company's strong financial performance supports this rating. Sigma-Aldrich's revenue increased 15% for the fourth quarter of 2007, primarily due to solid organic growth and also helped by acquisitions and favorable exchange rate effects. Net income increased to $84.9 million from $71.6 million in the year-ago quarter. Looking forward, management expects earnings per share for 2008 in the range of $2.52 to $2.62. Sigma-Aldrich is setting up a manufacturing hub in China as part of its efforts to generate 25% of its total revenue from Canada, Asia-Pacific and Latin America by 2010. The company is also considering construction of a facility in South Korea to supply electronic chemicals for use in the semiconductor market. There are also plans to expand capacity at facilities in Ireland and Switzerland. Successful completion of these initiatives could further strengthen the business going forward. However, any unexpected delay in commercializing the company's strong product pipeline could impact its revenue stream. Any slowdown in consumption industries could also have adverse effects. Steel Dynamics ( STLD - Get Report) is the nation's fifth-largest producer of carbon steel products. The company operates five electric-furnace mini-mills and employs about 3,500 people. It produces flat-rolled steel, fabricated products, and so-called long products such as bars and beams. The company produces its steel primarily from steel scrap. The company was founded in 1993.
We have rated Steel Dynamics a buy since June 2003. The company continues to offer superior returns to its shareholders. Return on equity increased to 26% for the fourth quarter of 2007. Net sales rose to $1.45 billion from $839.80 million in the fourth quarter of 2006. This increase was driven primarily by the October 2007 acquisition of OmniSource, one of the leading scrap metal recycling companies in North America. Furthermore, the company's capacity expansion plans for its Structural and Rail division is expected to increase production capacity to 2 million tons per year, compared with 1 million in 2006. Looking forward, positive industry trends could improve the company's bottom-line performance in the near future. Demand for steel, and therefore steel prices, continues to be strong in 2008 due to increased demand in emerging markets and a weakening U.S. dollar. In addition, strong global economic activity and exceptional inventory controls are expected to increase production despite recessionary trends in the U.S. However, the higher cost of scrap metal and energy could hurt Steel Dynamic's operating margin if current steel pricing trends do not continue. Any undue delay in completing the company's planned capacity enhancement program could hinder growth prospects. FMC Corp. ( FMC - Get Report) is a diversified global chemical company operating in three business segments: Agricultural Products, Specialty Chemicals and Industrial Chemicals. The Agricultural Products segment focuses primarily on insecticides and herbicides. The Specialty Chemicals segment's products include food ingredients and pharmaceutical additives. The Industrial Chemicals segment manufactures a wide variety of inorganic materials, including soda ash, hydrogen peroxide, specialty peroxygens and phosphorous chemicals. The company has operations in many areas around the world. North America represents its single largest geographic market. We have rated FMC a buy since July 2004. Although the company shows low profit margins, its strengths can be seen in multiple areas. For the forth quarter of 2007, revenue grew 15% year over year. Additionally, FMC improved earnings per share by 42% and has demonstrated a pattern of positive EPS growth over the past two years. Finally, net income increased substantially to $40.9 million from $12.9 million. FMC's stock has surged 57% over the past year thanks to its strong earnings growth, and we feel that it should continue to move higher. It is important to bear in mind, however, that the financial health of companies in the chemicals industry is dependent on the costs of raw materials (especially oil and gas) and the overall strength of the economy. Additionally, almost any stock can fall in a broad market decline. Badger Meter ( BMI - Get Report) manufactures and markets flow measurement and control products. These products measure a variety of liquids, such as water, oil and lubricants. The company serves utilities, municipalities and industrial customers worldwide. Badger operates in two business segments, Utility and Industrial. The utility products are used by both public and private water systems, while the industrial products provide flow-measurement solutions in a variety of specialty industries including petroleum, food and beverage, pharmaceutical and concrete. The company was founded in 1905, and has major U.S. facilities in Wisconsin and Oklahoma. Foreign facilities are located in Mexico, Germany and the Czech Republic. Badger has been rated a buy since August 2003. The company's strengths include revenue growth, net income growth and return on equity. For the first quarter of 2008, Badger's revenue rose by 30% year over year. This growth appears to have helped boost earnings per share, which improved significantly to 41 cents from 17 cents in the first quarter of 2007. Net income more than doubled over the same period, rising from $2.6 million to $6 million. Finally, return on equity has improved slightly to 22% from 19%.
Powered by its strong earnings growth and other factors, shares have surged 52% over the past year. While this makes the stock somewhat expensive compared to the rest of its industry, we feel that the company's strengths justify the higher price levels at this time. Bear in mind, however, that Badger's future performance could be affected by any regulatory changes, especially those dealing with the use of lead, which is used in the manufacture of certain meters, or the use and licensing of radio frequencies necessary for the company's automatic meter reading and advanced metering infrastructure products. Badger's future results could also be affected by the overall health of the U.S. economy, including housing starts and overall industrial activity, and any changes in foreign economic conditions, including currency exchange rates. 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.