Each business day, TheStreet.com Ratings compiles a list of the top five stocks in one of five categories: fast-growth, all-around value, large-cap, mid-cap and small-cap. These lists are 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 $500 million to $10 billion that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 60 factors. Each stock must also be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks 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. Perrigo ( PRGO - Get Report) is a global healthcare supplier that manufactures over-the-counter pharmaceutical and nutritional products for the store brand market. Its primary markets and locations of manufacturing and logistics operations are the U.S., Israel, Mexico and the United Kingdom.
Management was pleased to announce that its team's efforts resulted in fiscal 2008's sales and earnings results being the best in the company's 120-year history. The company intends to grow its business while maintaining a focus on quality in 2009. While Perrigo may harbor some minor weaknesses, we do not see these as having any significant impact on its future financial results. Balchem ( BCPC - Get Report) develops, manufactures and markets specialty performance ingredients and products for the food, feed and mechanical sterilization industries, producing choline products for both human and animal consumption. Our buy rating for Balchem has not changed since June 2003. The company again reported record quarterly results in net sales for the second quarter of fiscal 2008, achieving a 41.8% increase year over year due to both organic and acquisition growth. Balchem also reported record net earnings, which increased 16.2% when compared with the second quarter of fiscal 2007. As a result, the company's net earnings per diluted common share increased 13.6% to 25 cents per share from 22 cents per share in the second quarter of fiscal 2007. Additionally, Balchem reported that its balance sheet ratios and cash flow continued to be strong in the second quarter. Management was pleased with the company's record results in the second quarter despite a difficult business environment. The company has worked to increase its global presence, and overseas demand has helped offset the challenges of the U.S. market. Balchem expects rising raw material costs to continue affecting its financial results in the near term, but management stated that appropriate steps would be taken to minimize the impact on operating margins and cash flow. Bear in mind, however, that global economic issues could still affect the company's results.
Circor International ( CIR - Get Report) has been manufacturing an array of valves since the early 1900s. It operates 16 manufacturing facilities in the U.S., Canada, Western Europe and China and services more than 12,000 customers in over 119 countries.Circor has been rated a buy since November 2004. The company's strengths can be seen in multiple areas, such as its impressive record of earnings-per-share growth, compelling growth in net income, revenue growth, and solid stock price performance. Earnings per share grew 68.9% for the first quarter of fiscal year 2008 when compared to the same quarter of fiscal 2007, which brought its three-year average EPS growth rate to a solid 47.7%. The company reported 9.5% growth in its revenue over the same period, which trailed its industry average but allowed it to boost net income, which grew 74.1% for the interim. In addition, as of the market's close on May 20 of this year, Circor's share price has jumped 38.8% compared to its closing price of one year prior. The stock currently trades at a valuation level that is in line with its peer average and a discount to the S&P 500 average. We feel that the company's strengths outweigh the fact that Circor sports a relatively low operating profit margin, at 11.1% for the quarter just ended. In its release reporting first-quarter results, the company indicated that its orders grew 27% year over year on the back of strength in its naval, aerospace and energy markets. Its backlog jumped 45% from the year-ago quarter. Management is guiding investors to expect EPS for the second quarter in the range of 74 cents to 83 cents, excluding special charges. This compares with 60 cents earned for the second quarter of fiscal 2007.
Westinghouse Air Brake Technologies ( WAB - Get Report) provides value-added, technology-based equipment and services for the global rail industry. Wabtec's highly engineered products, which are intended to enhance safety, improve productivity and reduce maintenance costs for customers, can be found on virtually all U.S. locomotives, freight cars and subway cars. Wabtec has been rated a buy since March 2005. The company's strengths can be seen in a variety of areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, impressive record of earnings per share growth and compelling growth in net income. For the second quarter of fiscal 2008, the company's revenue increased 19.8% year over year. This growth contributed to 21.1% improvement in earnings per share, which rose from 57 cents a year ago to 69 cents in the most-recent quarter. Net income also increased, rising 20.0% when compared with the same quarter last year. In addition, net operating cash flow increased 757.52% to $64.07 million. Wabtec's management credited international and aftermarket expansion with helping to drive growth for the company's second quarter. While the company is currently trading at a premium to its peers, we feel that its strengths justify the current valuation. II-VI ( IIVI - Get Report) develops, manufactures and markets high-technology materials and derivative products for precision use in industrial, medical, military, security and aerospace applications. Our rating for II-VI has been in place since October 2006. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels and solid stock price performance. For the fourth quarter of fiscal 2008, the company reported revenue growth of 31.4% year-over-year. This growth helped boost earnings per share from 37 cents in the fourth quarter of fiscal 2007 to 50 cents in the most-recent quarter. II-VI has a low debt-to-equity ratio of 0.01, indicating very successful management of debt levels. Along with this, the company demonstrates the ability to cover its short-term cash needs, based on a quick ratio of 2.77.
Powered by its strong earnings growth of 35.13% and other important driving factors, this stock has surged by 26.09% over the past year. We feel that the company's strengths outweigh the fact that it shows weak operating cash flow. 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 a rating alone cannot tell the whole story and should be part of an investor's overall research.