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, fast-growth stocks are in the spotlight. 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 of all stocks rated by our proprietary quantitative model, which looks at more than 60 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. 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. Diamond Offshore ( DO - Get Report) engages in the contract drilling of oil and gas wells. The company's fleet of 30 submersibles enables it to offer a range of services in various markets worldwide, including the deep-water, harsh-environment and conventional semisubmersible markets. Diamond also owns 13 jack-up rigs, which are mobile, self-elevating drilling platforms equipped with legs that are lowered to the ocean floor until a foundation can be built to support the platform. Finally, Diamond has one drillship, the Ocean Clipper, located offshore Brazil.
We have rated Diamond a buy since June 2005. Boosted by solid sales growth from its Contract Drilling business segment, Diamond's revenue surged 29% year over year to $666.7 million in the first quarter of fiscal 2008. First-quarter earnings rose 30%, fueled by a rise in daily rates for the company's deepwater rigs. Net income for the quarter increased to $290.6 million, or $2.09 a share, from $224.2 million, or $1.64 a share, in the first quarter of fiscal 2007. In keeping with its policy of considering the payment of special cash dividends on a quarterly basis, the Board of Directors recently declared a special cash dividend of $1.25 per share of common stock in addition to a regular cash dividend of $0.125 per share of common stock. Both dividends are payable in June 2008. Finally, Diamond's debt-to-equity ratio is very low at 0.17, implying that debt levels have been successfully managed. While lower than a year ago, Diamond's gross profit margin continued to remain relatively high at 62%. However, the company's net profit margin of 37% significantly outperformed against the industry. Furthermore, the company has demonstrated a pattern of positive earnings per share growth over the past two years, and we feel that this trend could continue. Although the company may harbor some minor weaknesses, we feel that they are unlikely to offset the company's strengths. Instead, we feel that the slowdown in the U.S. economy and weak job data pose larger risks as they may put pressure on the demand for oil and gas. This could in turn disturb activities related to exploration and production, affecting the number of rigs that are operational in the market and potentially affecting Diamond's future profitability.
Balchem ( BCPC - Get Report) develops, manufactures, and markets specialty performance ingredients and products for the food, feed and mechanical sterilization industries. Balchem produces choline products for both human and animal consumption. Choline, a vitamin-B complex, plays a vital role in the metabolism of fat and the building and maintaining of cell structures. Choline deficiency can result in reduced growth and perosis (a disease characterized by a deformity of the leg joint) in poultry and fatty liver, kidney necrosis and general poor health in swine, among other symptoms. In humans, choline is recognized as playing a key role in the structural integrity of cell membranes, the processing of dietary fat, reproductive development and neural functions such as memory and muscle function. Balchem also produces encapsulated performance ingredients for use throughout the food and animal-health industries in end products such as baked goods, refrigerated and frozen dough, processed meats, seasoning blends, and confections. These performance ingredients are used to enhance nutritional fortification and improve shelf life of prepared products. Our buy rating for Balchem has not changed since June 2003. The company reported record quarterly results in net sales and net earnings for the first quarter of fiscal 2008. Balchem achieved net sales of $56.9 million, reflecting a 35% increase compared to the same quarter one year prior. Net earnings also increased 35% year over year to $4.6 million. As a result, the company's net earnings per share increased 32% to 25 cents. Management reported that the integration of several acquisitions made during fiscal 2007 have gone well, and stated that the first-quarter results did not yet reflect the company's full expectations for those acquisitions. Additionally, management again noted that rising raw material costs are expected to remain a challenge for Balchem in the near term. While the company has taken pricing steps to counteract the effects of these increased input costs, the actions taken in the first quarter did not offset all the cost increases, primarily due to timing. Overall, management expects the remainder of fiscal 2008 to continue to bring double-digit increases in sales and earnings. Bear in mind, however, that global economic issues could affect the company's results.
DeVry ( DV) is an international higher education company. Classes are offered at a number of locations, as well as through DeVry University Online. The company has been rated a buy since January 2007. DeVry's strengths can be seen in a variety of areas, such as its impressive record of EPS growth, compelling growth in net income, revenue growth and largely solid financial position. For the third quarter of fiscal 2008, DeVry reported EPS of 53 cents, vs. 32 cents one year prior. This increase continues the company's demonstrated pattern of EPS growth over the past two years, a trend that we feel should continue. The company's third-quarter net income of $38.3 million represents an increase of 67% year over year. DeVry also has no debt to speak of, and its revenue rose 18% in the second quarter. In other developments, the company disclosed on May 19 that federal investigators have launched an investigation into the company's recruitment practices, and that management is cooperating fully with this probe. While we believe the stock is a strong one based on its quantitative merits, this is a situation that bears watching. Flowserve ( FLS - Get Report) engages in the development, manufacture, and sale of precision-engineered flow equipment through three divisions: Flowserve Pump, Flow Control and Flow Solutions. The company operates worldwide in more than 56 countries, with 43% of its revenues coming from North America. We have rated Flowserve a buy since January 2007 based on several positive investment measures, such as the company's increasing revenue and net income. Additionally, the company reported record results in various areas including EPS, sales and bookings for the first quarter of fiscal 2008. Flowserve's revenues rose 24% year over year for the first quarter, largely due to strong sales in the oil and gas markets. The company also reported that fully diluted earnings per share improved 159%, rising to $1.53. Additionally, bookings were up 31% for the quarter.
Management raised its fiscal 2008 EPS forecast to a target range of $5.90 to $6.20 from its previous estimate of $5.10 to $5.40. The company is encouraged by its first quarter results and its continued strength in key markets, and remains confident in its ability to successfully carry out its operational excellence initiatives to increase its performance in the current global environment. Bear in mind, however, that the recent surge in commodity costs is a challenge to the machinery industry as a whole and could therefore affect Flowserve's results in the future. XTO Energy acquires, develops, exploits and explores oil and gas properties. The company also produces, processes, markets and transports oil and natural gas. XTO's proved reserves are located primarily in various regions of Alaska, Arkansas, Colorado, Kansas, New Mexico, Oklahoma, Texas and Wyoming. These fields are generally long-lived, with well-established production histories. We have rated XTO Energy a buy since November 2001. We view the company's revenue growth, stock performance and increase in net income as strengths. For the first quarter of fiscal 2008, the company reported that its net income rose 21% to $465 million, while revenue rose 43% year over year. This growth appears to have trickled down to the bottom line, as earnings per share improved to 92 cents from 82 cents a year ago. Finally, net operating cash flow increased 12% to $957 million. Management feels that the first-quarter results reflect a strong start to fiscal 2008, which they hope will be another record year for the company. While the stock's sharp appreciation over the last year has made it a premium compared to some of its peers, we feel the price levels are justified by the strengths of the company. Bear in mind, however, that the company operates in an industry that is highly volatile, and the cyclical nature of oil and gas prices could impact XTO's future results. 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 affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company. For those reasons, we believe that a rating alone cannot tell the whole story and that it should be part of an investor's overall research.