STOCK PICKS: Top 5 Fast-Growth for Oct. 27

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 -- 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 all stocks rated by our proprietary quantitative model, which looks at over 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.

Neogen ( NEOG) and its subsidiaries develop, manufacture and market products dedicated to food and animal safety. Our buy rating for Neogen has not changed since February 2003. This rating is based on strengths such as the company's robust revenue growth, impressive record of earnings-per-share growth and expanding margins.

For the first quarter of fiscal 2009, the company reported that its revenues, net income and EPS all represented quarterly records. Revenue growth was reported at 25.7% year over year, with revenue appearing to help boost EPS, which improved 17.2%. Net income also increased, rising 24.0% from $3.01 million in the first quarter of fiscal 2008 to $3.73 million in the most recent quarter. Neogen attributed its record results to the assimilation of recent acquisitions and significant growth in the company's primary product lines. Additionally, the company's gross profit margin is rather high at 54.70%, but Neogen has managed to decrease this number over the last year.

Neogen's sale price has not changed very much compared with where it was a year ago, because of the relatively weak overall performance of the market and the company's recent mixed results. However, it is currently trading at a price that is somewhat expensive compared with the rest of its industry. Because of the strengths detailed here and a lack of significant weaknesses, we feel that higher price level is justified at this time.

ManTech International ( MANT) provides technologies and solutions for mission-critical national security programs for the intelligence community, the space community and various departments and agencies of the U.S. federal government. ManTech has been rated a buy since March 2005. Our rating is based on strengths such as the company's robust revenue growth, largely solid financial position and record of EPS growth.

For the second quarter of fiscal 2008, revenue rose by 33.3% year over year. This increase was primarily the result of a business strategy focused on high-end defense and intelligence markets supporting U.S. national security. Revenue growth appears to have helped boost earnings per share, which improved 40.9% when compared with the same quarter a year ago.

The EPS increase from 44 cents to 62 cents represents the continuation of a pattern of positive EPS growth demonstrated by ManTech over the past two years, a trend which we feel should continue. Net income also increased in the second quarter, rising 45.0% from $15.10 million in the second quarter of fiscal 2007 to $21.90 million in the most recent quarter. ManTech's low debt-to-equity ratio of 0.16 and quick ratio of 1.30 illustrate the company's successful management of debt levels and avoid short-term cash problems.

Management announced that it is focused on gaining additional new business opportunities, such as a recent U.S. Navy award, for the remainder of fiscal 2008, along with continuing to strive for organic growth in fiscal 2009. For the third quarter of fiscal 2008, the company announced revenue guidance of 23% to 27%, while full-year fiscal 2008 guidance anticipates 27% to 30% growth in revenue.

While the company shows low profit margins, we feel that its strengths outweigh any weaknesses. In addition, we believe that ManTech's stock should continue to move higher, despite having already enjoyed a very nice gain of 53.20% over the past year. Amedisys ( AMED) provides home health and hospice services in the southern and southeastern U.S. We have rated Amedisys a buy since January 2005.

On July 29, the company reported record financial results for the second quarter of fiscal 2008. Net earnings for the quarter surged 35.6% year over year due to coverage expansion from the buyout of TLC Healthcare Services. Net income increased to $20.38 million from $14.92 million in the second quarter of fiscal 2007. Diluted earnings per share rose 43.9% year over year to 82 cents per share. Helped by acquisition revenue, an increase in re-certifications, growth in average revenue per episode and a rise in admissions, the company's net services revenue climbed 84.5% to $312.67 million.

Additionally, the number of home health agencies increased to 454 from 296, while hospice agencies rose to 44 from 17 in the prior year's quarter. During the second quarter, Amedisys acquired five home health locations from Health Management Associates, which should add around $4 million to its annualized revenue.

Management announced that it was pleased with its second quarter results and the progress of the post-acquisition integration of TLC. Looking ahead to full year 2008, Amedisys included the anticipated impact of recent acquisitions in raising its net service revenue guidance to a range of $1.10 billion to $1.15 billion. The company also raised its EPS guidance to a range of $3.00 to $3.10 per share from the previous guidance of $2.70 to $2.80 per share. Bear in mind, however, that the company's revenue and earnings could be affected by any adverse changes in Medicare rates and reimbursement methodologies or any challenges related to the integrations of recent acquisitions.

Ralcorp Holdings ( RAH) is a Missouri-based company that manufactures, distributes and markets store-brand food products.

Ralcorp has been rated a buy since February 2004. This rating is based on the company's strong revenue growth and higher earnings, along with its improved returns and solid debt management during the third quarter of fiscal 2008. The company reported that its net sales rose 12.9% year-over-year in the third quarter of fiscal 2008 due to volume gains across all segments and higher pricing in response to rising input costs. As a result of the sales gain, Ralcorp's earnings quadrupled to $45.80 million.

Strong fundamentals are another positive for this company, with cash balances surging from $55.90 million to $85.30 million, net operating cash flow increasing 20.7%, and total debt decreasing 13.4%.

Return on equity and return on assets improved 1,497 and 542 basis points, respectively. In addition, Ralcorp recently completed a merger with Post cereals for $2.60 billion.

The company's gross profit margin and operating margin deteriorated 145 and 83 basis points, respectively, as a result of rising raw-material costs and transportation expenses. The company also appears to have a weak liquidity position, given its quick ratio of 0.69. Bear in mind that any failure to integrate recent acquisitions could hinder Ralcorp's future performance.

Quality Systems ( QSII) develops and markets health-care information systems that automate medical and dental practices, networks of practices such as physician hospital organizations, ambulatory care centers, community health centers and medical and dental schools.

We have rated Quality Systems a buy since November 2001 because of strengths such as the company's robust revenue growth, notable return on equity and impressive record of earnings-per-share growth. For the first quarter of fiscal 2009, the company reported that its revenue rose 31.4% year over year. This growth appears to have helped boost EPS, which improved 37.9% when compared with the same quarter a year ago.

Quality Systems has in fact demonstrated a pattern of positive EPS growth over the past two years, and we feel that this trend is likely to continue. Net income also increased in the first quarter, rising 40.0% from $7.94 million a year ago to $11.11 million in the most recent quarter. The company has no debt to speak of, and this results in a debt-to-equity ratio of zero.

A quick ratio of 1.85 is also a favorable sign, indicating that Quality Systems has the ability to cover its short-term liability needs. In addition, the Healthcare Strategic Initiatives acquisition completed in May contributed about $1.7 million to Quality Systems' revenue during the quarter.

While the company's stock is currently trading at a premium valuation, we feel that the strengths outlined above justify the higher price level.

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.

This article was written by a staff member of TheStreet.com Ratings.

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