First Financial, Pegasystems: Top 5 Stocks

TheStreet.com Ratings provides exclusive stock, ETF and mutual fund recommendations using proprietary tools. Our "safety first" approach aims to reduce risk while achieving total return performance.

BOSTON ( TheStreet) -- The following mid-cap companies have market values between $500 million and $10 billion and receive "buy" ratings from our proprietary quantitative model, which considers more than 60 factors. They're ordered by their potential to appreciate, starting with the company with the best growth prospects.

Church & Dwight ( CHD) sells household products, including Arm & Hammer Baking Soda and Brillo Pads.

The numbers: Second-quarter net income increased 27% to $58 million and earnings per share climbed 23% to 88 cents, restrained by a higher share count, as revenue increased 5% to $623 million. The operating margin ascended from 14% to 16% and the net margin passed 9%. A quick ratio of 1.2 demonstrates ample liquidity and a debt-to-equity ratio of 0.5 indicates conservative leverage.

The stock: Church & Dwight is up 3% in 2009, underperforming major U.S. indices. The stock trades at a fair price-to-earnings ratio of 19, but offers a weak dividend yield of 1%. The company's record of consistent earnings growth regardless of economic conditions makes it an attractive investment.

Monro Muffler Brake ( MNRO) provides undercar repair and tire services.

The numbers: Fiscal first-quarter net income jumped 21% to $9.4 million and earnings per share climbed 18% to 46 cents as revenue increased 6% to $128 million. The operating margin rose from 12% to 13% and the net margin inched past 7%. Monro has a weak cash position, with just $3 million of reserves. But a debt-to-equity ratio of 0.5 demonstrates conservative leverage.

The stock: Monro is up 2% in 2009, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 20, indicating a slight premium to the market, and offers a 1.1% dividend yield, less than the average of S&P 500 companies. Monro is benefitting from a pullback in consumer spending on new cars and auto-dealership closures.

Pegasystems ( PEGA) sells software to automate business processes.

The numbers: Second-quarter net income surged 294% to $11.2 million and earnings per share increased 275% to 30 cents as revenue rose 25% to $64 million. The operating margin ascended from 5% to 18% and the net margin advanced from 6% to 18%. Pegasystems has an outstanding liquidity position, which is evident in its quick ratio of 3.9, and has no debt or interest expenses.

The stock: Pegasystems has rocketed 125% in 2009, trouncing major U.S. indices. The stock trades at an exorbitant price-to-earnings ratio of 42 and offers a dividend yield below 1%. Automation software reduces corporate expenses and therefore has recessionary appeal.

J&J Snack Foods ( JJSF) distributes snack foods and frozen beverages throughout the U.S.

The numbers: Fiscal third-quarter revenue increased 2% to $180 million as earnings improved 38% to $15 million, or 80 cents a share. The operating margin climbed from 10% to 14% and the net margin increased from 6% to 8%. Over $81 million of cash reserves and a quick ratio of 1.9 demonstrate ample liquidity. And the company holds minimal debt.

The stock: J&J Snack has climbed 19% in 2009, outpacing the Dow Jones Industrial Average and S&P 500 Index. The stock trades at an expensive price-to-earnings ratio of 21 and offers a dividend yield below 1%. J&J is benefitting from a moderation in consumer spending.

First Financial ( FFIN) is a commercial bank in Texas.

The numbers: Second-quarter earnings remained flat at $14 million, or 65 cents a share, as revenue fell 7% to $49 million. The operating margin rose from 46% to 51% and the net margin grew from 26% to 28%. First Financial is adequately capitalized, with $146 million of cash, compared to $177 million of debt. A debt-to-equity ratio of 0.5 demonstrates conservative leverage. We give the company a financial strength score of 8.9 out of 10.

The stock: First Financial is down 8% in 2009, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 20, a modest premium to the market, and offers a lackluster 2.7% dividend yield, less than the average of S&P 500 companies.

TSC Ratings was given an award this year for "Best Stock Selection" among independent research providers by BNY ConvergEx Group. A rating can be viewed for any stock through our screener. Ratings are derived from a variety of fundamental and pricing figures and represent our opinion of risk-adjusted performance. However, the rating doesn't incorporate all factors that can alter a stock's performance.

-- Reported by Jake Lynch in Boston.

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