Top Five Value Stocks for a Shaky 2010

BOSTON ( TheStreet) -- The stock-market rally, which stalled on Friday, may extend this quarter as emerging signs of economic growth produce higher profits. Instead of piling into hot names, investors should consider buying undervalued companies in established industries. The following five stocks are poised to gain.

5. TreeHouse Foods ( THS) sells pickles and non-dairy coffee creamer.

The numbers: Third-quarter net income increased 153% to $28 million, and earnings per share climbed 143% to 85 cents. Revenue inched up 1% to $379 million. TreeHouse's operating margin extended from 7% to 8%. A quick ratio of 0.6 indicates poor liquidity. A 0.7 debt-to-equity ratio reflects conservative leverage.

The stock: TreeHouse rose 41% during the past year, outpacing major U.S. indices. The stock trades at a price-to-earnings ratio of 19, a discount to food products peers. TreeHouse doesn't pay dividends.

4. Lincoln Educational Services ( LINC) provides career education.

The numbers: Third-quarter profit more than doubled to $14 million, or 50 cents a share, as revenue grew 48% to $148 million. Lincoln's operating margin increased from 10% to 16%. The company has a strong financial position, with $38 million of cash and $37 million of debt.

The stock: Lincoln Educational Services more than doubled during the past year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 15, a discount to diversified consumer services peers. Lincoln doesn't pay dividends.

3. Silgan Holdings ( SLGN) sells metal and plastic packaging.

The numbers: Third-quarter profit advanced 38% to $74 million, or $1.91 a share. Revenue ascended 5% to $1 billion. Silgan's operating margin stretched from 11% to 13%. The company has an adequate liquidity position, evident in its quick ratio of 1.3. Its 1.4 debt-to-equity ratio is higher than ideal.

The stock: Silgan Holdings increased 18% during the past year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 13, a discount to containers and packaging peers. Shares offer a 1.4% dividend yield.

2. General Mills ( GIS) sells cereal and other food products.

The numbers: Fiscal second-quarter profit increased 50% to $566 million, or $1.66 a share. Revenue inched up 2% to $4.1 billion. The company's gross margin jumped from 33% to 46%, and its operating margin widened from 12% to 22%. A quick ratio of 0.6 reflects suboptimal liquidity. A 1.1 debt-to-equity ratio indicates a sizable debt load.

The stock: General Mills advanced 20% during the past year, less than major U.S. indices. The stock trades at a price-to-earnings ratio of 15, a discount to food products peers. Shares offer a 2.8% dividend yield.

1. Church & Dwight ( CHD) sells household products.

The numbers: Third-quarter profit soared 43% to $70 million, or 98 cents a share. Revenue inched up 2% to $646 million. Church & Dwight's operating margin ascended from 15% to 18%. A quick ratio of 1.1 indicates adequate liquidity. A debt-to-equity ratio of 0.5 reflects conservative leverage.

The stock: Church & Dwight climbed 10% during the past year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 18, a premium to household products peers. Shares offer a 0.9% dividend yield.

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