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. Edwards Lifesciences ( EW) is a global provider of products and technologies designed to treat advanced cardiovascular disease. The company has been rated a buy since February 2007. This rating is supported by the company's efficiency, solvency, and growth in net income, revenue and EPS. Edwards Lifesciences reported that its results in the first quarter of fiscal 2009 were due in part to strong heart valve sales. Although the company's revenue was less than that of the industry average, it was able to report an increase of 5.6% year over year. This growth appears to have been enough to have helped boost EPS, which showed significant improvement when compared to the prior year's quarter, rising from 31 cents to $1.03 per share. We feel that the company's trend of positive EPS growth over the past two years should continue going forward. Net income surged in the fourth quarter, rising 232.4% from $18.2 million to $60.5 million. Edwards' very low debt-to-equity ratio of 0.1 indicates that the company has been very successful at debt management, while a quick ratio of 2 demonstrates the ability to cover short-term liquidity needs. An additional sign of strength for the company is its expanding return on equity, which increased from 12.6% to 18.2% over the past year.
Management considered Edwards' first quarter results strong, and announced that it expects second quarter diluted EPS in the range of 73 cents to 77 cents per share. The company increased its full-year EPS estimate by two cents to a range of $2.95 to $3.03 per share. Any company may harbor some minor weaknesses, but we do not currently see any in Edwards Lifesciences that are likely to significantly impact future results. First Financial ( THFF) is a bank holding company whose subsidiaries provide various financial services in Indiana and Illinois. It has been rated a buy since August 2006 because of its solid stock price performance and net income growth. For the fourth quarter of fiscal 2008, First Financial reported weak revenue results, but declining revenue does not appear to have hurt the company's bottom line. EPS improved from 49 cents in the fourth quarter of fiscal 2007 to 55 cents in the most recent quarter. Net income also increased, rising 12.4% from $6.4 million to $7.2 million. In addition, cash and cash equivalents increased from $74.3 million to $76.8 million. Investors have apparently begun to recognize these and other positive factors, driving First Financial's stock price up 34.4% over the past year. Although this puts the stock at a premium valuation compared to its peers, we feel that the company's strengths justify the higher price level at this time. Pegasystems' ( PEGA) business management software helps companies manage complex, changing business processes by automating decision-making and the implementation of those decisions. We have rated the company a buy since May 2008. This rating is based on the company's growth, solvency and expanding profit margins.
For the fourth quarter of fiscal 2008, the company reported revenue growth of 26.9% year-over-year. Continuing an impressive record of EPS growth, Pegasystems' EPS improved significantly, rising from 3 cents to 8 cents. Net income also increased in the fourth quarter, surging 99.6% from $1.4 million to $2.8 million. Both revenue and net income growth exceeded the averages for the Software industry. Pegasystems' gross profit margin is rather high at 64.8%; it has increased from the same quarter a year ago. The company has no debt to speak of, and its resulting debt-to-equity of zero can be seen as a favorable sign. In addition, Pegasystems maintains a quick ratio of 3.4, which clearly demonstrates its ability to cover short-term cash needs. Management reported that the company's fourth quarter revenue was a record for the company. Pegasystems also achieved record new license signings for the quarter. Looking ahead to fiscal 2009, the company currently expects full-year revenue to top $250 million, while net income could surpass $17 million on a GAAP basis. The company's weak operating cash flow is a concern, but we feel that the strengths detailed above outweigh any weaknesses at this time. Quality Systems ( QSII) develops and markets healthcare 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 due to its efficiency, solvency, and growth in revenue, net income, and EPS. Solid stock price performance also supports this rating.
For the third quarter of fiscal 2009, the company reported that its revenues rose 36.1% year over year. The company announced that its net revenue results were a record for the company. A 15% improvement in EPS implies that the revenue growth trickled down to the bottom line. The company has achieved positive EPS growth routinely over the past two years, and we feel that this trend should continue. Net income also increased in the third quarter, rising 17.3% from $11.2 million to $13.2 million. Quality Systems has no debt to speak of, giving it a debt-to-equity ratio of zero. We consider this a favorable sign, as is a quick ratio of 2, which demonstrates the company's ability to cover its short-term liquidity needs. Quality Systems' stock has risen over the past year, reflecting the earnings growth and other positive factors like the ones cited above. Although this increase has driven to the stock to a level that is somewhat expensive to the rest of the Software industry, we feel that the company's strengths justify the higher price level at this time. Check Point Software Technologies ( CHKP) and its subsidiaries develop, market, and support Internet security solutions for enterprise and high-end networks, service providers, consumers, and small and medium businesses. We upgraded the stock to a buy in January 2009. The buy rating is supported by the company's efficiency, solvency, and growth in revenue and EPS. For the first quarter of fiscal 2009, Check Point reported that it posted record revenues of $195 million, with revenue rising 1.8% year-over-year. This growth appears to have trickled down to the company's bottom line, as EPS improved 5.5% when compared to the same quarter a year ago. Net income also increased in the first quarter, rising 3.4% from $78.3 million to $80.9 million. The company's gross profit margin has increased from a year ago, currently coming in at 95.1%, which is very high. Check Point has no debt to speak of, which we consider to be a relatively favorable sign. In addition, the company's quick ratio of 2.9 indicates that it is clearly able to cover its short-term cash needs.
Management stated that Check Point's first quarter results provided a good start to fiscal 2009. The company believes that it will be able to continue to post increased revenues and EPS during the year. We find the company's return on equity to be somewhat disappointing, but feel that the strengths detailed above outweigh any potential weakness at this time. Our quantitative rating, which can be viewed for any stock through our 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.