Top 5 Stocks: Dollar Tree, General Mills

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BOSTON ( TheStreet) -- These companies have annual revenue above $500 million, below-average valuations, debt that's less than 49% of total capital and "buy" ratings from our proprietary quantitative model, which considers more than 60 factors. They're ordered by their potential to gain.

MGE Energy ( MGEE) is a Wisconsin-based electric company.

The numbers: First-quarter revenue dropped 5% to $181 million, but net income increased 8% to $15 million. Earnings per share climbed 3% to 65 cents, hurt by a higher share count. The operating margin passed 13% and the net margin increased from 7% to 8%. Although a quick ratio of 0.4 indicates weak liquidity, MGE has a lower debt load than its peers. A debt-to-equity ratio of 0.8 is a sign of restrained leverage. We give the company a financial strength score of 8.9 out of 10, which is higher than our "buy"-rated average.

The stock: MGE has risen 9% this year, beating the Dow Jones Industrial Average, but underperforming the S&P 500 Index. The stock trades at a fair price-to-earnings ratio of 15 and offers a 4% dividend yield, which is higher than the S&P 500 average.

Advance Auto Parts ( AAP) sells replacement parts, accessories and maintenance items for cars.

The numbers: First-quarter revenue increased 10% to $1.7 billion. Earnings rose 14% to $94 million, or 98 cents. The operating margin remained stable at 9% and the net margin improved from 5% to 6%. Just $51 million of cash reserves and a quick ratio of 0.1 indicate a weak liquidity position. But a debt-to-equity ratio of 0.3 demonstrates modest leverage.

The stock: Advance Auto Parts has climbed 40% this year, outpacing major U.S. indices. The stock trades at an expensive price-to-earnings ratio of 18 and offers a dividend yield below 1%.

Village Super Market ( VLGEA) operates the ShopRite chain of supermarkets.

The numbers: Fiscal third-quarter revenue increased 7% to $293 million. Earnings increased 25% to $6.3 million, or 47 cents. Same-store sales, which compare locations open at least a year, jumped more than 7%. The company has a modest $36 million in debt and over $47 million of cash, which works out to a quick ratio of 0.8 and a debt-to-equity ratio of 0.2.

The stock: Village Super Market has climbed 2% this year, underperforming major U.S indices. The stock trades at a fair price-to-earnings ratio of 17 and offers a 2.9% dividend yield.

Dollar Tree ( DLTR) operates discount variety stores.

The numbers: First-quarter revenue increased 7% to $1.2 billion. Earnings jumped 39% to $60 million, or 66 cents. The operating margin expanded from 7% to 8% and the net margin inched up to 5%. A quick ratio of 0.9 indicates a less-than-ideal liquidity position. But a debt-to-equity ratio of 0.2 reflects modest leverage.

The stock: Dollar Tree is up 10% in 2009, beating the Dow, but underperforming the S&P 500. The stock trades at a fair price-to-earnings ratio of 17, but doesn't pay dividends.

General Mills ( GIS) makes cereal, snacks and other packaged foods.

The numbers: Fiscal fourth-quarter revenue increased 5% to $3.6 billion. Earnings doubled to $358 million, or $1.07. The operating margin climbed from 9% to 20% and the net margin jumped from 5% to 10%. General Mills has a weak liquidity position, reflected by a quick ratio of 0.5, but has added $99 million of cash since the year-earlier quarter. A debt-to-equity ratio of 1.4 indicates high leverage.

The stock: General Mills has dropped 4% in 2009, underperforming the Dow and S&P 500. The stock trades at a fair price-to-earnings ratio of 15 and offers a 3.2% dividend yield.

-- Reported by Jake Lynch in Boston. Feedback can be sent to jake.lynch@thestreet.com.

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