Top 5 Mid-Cap Stocks for March 12

Each business day, TheStreet.com Ratings 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 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.

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 growth, efficiency, solvency and stock performance.

For the fourth quarter of fiscal 2008, the company reported revenue growth of 17.3% year over year. This growth outpaced the industry average of 13.9%, and appears to have trickled down to ManTech's bottom line, as earnings per share improved from 61 cents to 69 cents. Net income also improved, rising from $21.4 million in the prior year's quarter to $24.6 million. ManTech's debt-to-equity ratio is favorably low at 0.06, and along with this maintains a quick ratio of 1.4, illustrating the ability to cover short-term cash needs. A slight improvement in return on equity when compared to the prior year's quarter can also be considered a modest strength for the organization. As for ManTech's stock, its price has risen over the past year, reflecting the earnings growth and other positive factors cited here.

Looking ahead to fiscal 2009, the company issued first quarter and full year revenue guidance reflecting the strong business momentum it sees in the national security and defense business. For the first quarter, ManTech anticipates total revenue growth of 14% to 19%, along with EPS growth in the range of 20% to 25%. Full year 2009 total revenue growth is expected to be in the range of 12% to 18%, with 14% to 20% EPS growth.

HMS Holdings ( HMSY) provides a variety of cost containment and payment accuracy services relating to government healthcare programs. We have rated this stock a buy since September 2004 on the basis of such strengths as the company's largely solid financial position, good cash flow from operations, and growth in revenue, net income and EPS.

For the fourth quarter of fiscal 2008, the company reported that its earnings surged 74.9% on higher revenue. Net income rose from $4 million in the fourth quarter of fiscal 2007 to $7.06 million in the most recent quarter. Revenue increased 25.8% year over year, greatly exceeding the industry average of 7.0%. This increase, led by strong revenue growth in each of the government healthcare program markets, appears to have helped boost EPS, which showed significant improvement over the same quarter a year ago, rising from 15 cents to 26 cents per share. HMS Holdings has a very low debt-to-equity ratio of 0.10, which implies that it has successfully managed its debt levels. In addition, a quick ratio of 3.2 clearly demonstrates an ability to cover short-term cash needs. Finally, net operating cash flow increased 17.50% when compared to the same quarter of last year.

Having had a record year in terms of revenue growth and profitability, the company expects to see strong results continue into the next fiscal year. Looking ahead to fiscal 2009, HMS Holdings raised its earnings outlook to $1.00 per share from previous guidance of $0.96 per share. The company is currently trading at a premium valuation, but we feel that the strengths detailed above justify the higher price at this time.

Myriad Genetics ( MYGN) is a biopharmaceutical company focused on molecular diagnostic and therapeutic products, conducting research in the fields of cancer, Alzheimer's disease, and infectious diseases like AIDS. We have rated the stock a buy since August 2008. Our rating is based on a variety of strengths, such as the company's growth in revenue, net income and EPS, its solvency and its stock performance.

For the second quarter of fiscal 2009, Myriad reported revenue growth of 48.7% year over year, which surpassed the Biotechnology industry's average of 23.7%. This growth appears to have helped boost EPS, which improved significantly when compared to the same quarter a year ago. EPS rose from a loss of 11 cents to a profit of 43 cents per share. We believe that the company should continue to show positive EPS growth in the future. Net income surged 518.5% in the second quarter, rising from a loss of $5.1 million to a profit of $21.2 million. Myriad's return on equity is a sign of significant strength within the company, as it increased greatly in comparison with the prior year's quarter. In addition, a debt-to-equity ratio of zero is a further favorable sign for the company, while its quick ratio of 7 clearly demonstrates the ability to cover short-term cash needs.

Although no company is perfect, we do not currently see any significant weaknesses that are likely to detract from the generally positive outlook for Myriad.

Knight Capital Group ( NITE) is a financial services company that provides electronic and voice access to the capital markets for buy-side, sell-side, and corporate clients, as well as asset management for institutions and private clients in the U.S. Our buy rating for this stock has been in place since January 2008. It is based on such strengths as the company's growth, efficiency, and solvency, along with its stock performance.

For the fourth quarter of fiscal 2008, Knight Capital reported revenue growth of 14.4% year over year. EPS also improved, rising from 52 cents to 89 cents. The company has demonstrated a pattern of positive EPS growth over the past two years, although we anticipate possible underperformance in this pattern in the coming year. Net income increased 60.8% when compared to the same quarter a year ago, rising from $49.6 million to $79.7 million. Return on equity can be seen as a modest strength for Knight Capital, as it improved slightly in comparison with the prior year's quarter. In addition, a debt-to-equity ratio of 0.5 is low and below the Capital Markets industry's average, implying that Knight Capital has successfully managed its debt levels.

Management was pleased with growth in revenue and pre-tax income in the most recent quarter, considering its results outstanding given current economic conditions. The company shows somewhat low profit margins, but we believe that the strengths detailed above outweigh any potential weakness at this time.

Sybase ( SY) provides enterprise and mobile software solutions for information management, development and data integration in commerce, communications, finance, government, defense, manufacturing, transportation and healthcare. We have rated the company a buy since October 2004. This rating is supported by such factors as the company's growth, efficiency and solvency.

For the fourth quarter of fiscal 2008, Sybase reported slight revenue growth of 3.3% year over year. This growth does not appear to have trickled down to the company's bottom line, however, as EPS dropped from 81 cents to 58 cents. Net operating cash flow improved slightly when compared to the same quarter last year, increasing 1.4% to $84.5 million. The gross profit margin is very high at 80.30% and has increased from prior year's quarter. Sybase's debt-to-equity ratio is low at 0.6, but is higher than the industry average, indicating that the company may need to further evaluate its debt management. The return on equity can be construed as a modest strength of the organization, as it has improved slightly when compared to the same quarter of last year.

Management announced that its quarterly and full-year results were the best in company history. Looking forward to the first quarter of fiscal 2009, Sybase expects to achieve revenue in the range of $260 million to $270 million, along with non-GAAP fully diluted EPS in the range of 40 cents to 42 cents and GAAP EPS in the range of 27 cents to 29 cents. Sybase has shown sub par net income growth recently, but we feel that the strengths detailed above outweigh that weakness at this time.

Our quantitative rating, which can be viewed for any stock through our stock screener stock rating screener, 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.

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