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The Lightning Round on CNBC is the most popular part of Jim Cramer’s program. Cramer, the most popular face in the stock market, changed his mind about Apple (AAPL) in this program as I anticipated. Apart from this, his analysis was excellent on extremely profitable stocks like Netflix (NFLX), Baidu (BIDU), and CME Group (CME). Here is a fundamental analysis of the stocks mentioned in Cramer’s Lightning Round on July 20 (data from finviz/morningstar, and current as of July 20’s close):

Rackspace Hosting (RAX): Although Rackspace returned 152% in a year - and although it just double topped - Cramer recommends taking the money off and buying Apple (AAPL) instead. Here is a brief comparison between these two companies:

Current as of July 20 close.

Rackspace

Apple

P/E

113.6

15.32

Forward P/E

54.04

13.3

Estimated EPS growth for the next 5 years

32.66%

20.44%

Dividend yield

-

-

Profit margin

6.06%

22.36%

Gross margin

68.43%

39.07%

Upside movement potential

3.2%

16.5%

As you see, Rackspace is no match for Apple. $1000 invested in AAPL one year ago is about $1521 now. Apple has no debts for the last five years, while Rackspace is struggling to stabilize its debt-to assets ratio. Moreover, Apple increased its Q3 earnings by 125%, leapfrogging from $3.25 billion to $7.31 billion. Since the beginning of July, AAPL jumped from $340 to $386.90. As I have said before, July is Apple’s time, and it might go higher. Current price is still a good entry point. My FED+ fair value estimate for Apple is $430.

Commercial Metals (CMC): It has been a rough year for CMC, and Cramer is bullish on this stock. As of the July 20 close, the basic materials company was trading at a forward P/E ratio of 9.05. Analysts expect the company to have an annualized EPS growth of 8.00% in the next five years, which sounds truly utopic given the -45.06% EPS growth of the past 5 years. With a profit margin of -0.1%, CMC pays a 3.31% yield. ROA is -0.04%, while ROE is -0.11%.

On the other hand, the stock is trading -19.19% lower than 52-week high. Target price is $17.94, implying an about 23.9% upside potential. P/S is 0.22. Debt-to assets ratio is slightly going down for the last three quarters. Insiders have been both selling stocks and exercising options for a while. I believe this is the time stay neutral to Commercial Metals.

Silvercorp Metals (SVM): Cramer is not interested in any Chinese stocks but Baidu (BIDU). Here is a brief comparison between these two:

Current as of July 20 close.

Silvercorp

Baidu

P/E

28.12

85.16

Forward P/E

12.81

38.75

Estimated EPS growth for the next 5 years

-

49.48%

Dividend yield

0.70%

-

Profit margin

53.47%

45.43%

Gross margin

74.28%

73.57%

Upside movement potential

34.6%

6.7%

Although a P/E ratio of that high does not fit my criteria, Baidu caught great momentum since 2009. $1000 invested in Jan 2009, is about $11,445 now. ROA is 43.32%, while ROE is 55.72%. Earnings increased by 136.41% this year, and 122.41% this quarter. SMA50 is 16.05%, while SMA200 is 27.78%. Although I would still avoid this company due to its extremely high P/E ratio, it is still one of the best Chinese stocks in the market. However, I would wait for a pullback if I were to invest. Cramer also recommends staying away from silver (SLV) and buying gold (GLD) instead. I would not invest in of these materials, which have no productivity at all.

Corrections Corporation of America (CXW): CXW did not show a significant performance this year, and Cramer is bearish on this stock. As of the July 20 close, CXW shows a trailing P/E ratio of 14.76, and a forward P/E ratio of 14.08. Analysts estimate an annual EPS growth of 12.33% for the next five years. The company has a 9.65% profit margin with no dividend yield. Target price indicates a 39.2% increase potential, while the stock is trading 19.86% lower than 52-week high. Debt-to assets ratio is around 40%. Insiders have been both exercising options and selling stocks for a while. Insider transactions for the last six months have decreased by 24.31%. If you own it, it is time to sell. I do not like the business idea, either. What is the point of commercializing the prisons?

CME Group (CME): CME showed a significant performance to heal itself after its doomsday situation in Nov, 2008. CME has a 16.30 P/E ratio and a 14.68 forward P/E ratio, as of the July 20 close. Analysts expect the company to enjoy 13.23% annual EPS growth in the next five years. Although dividend yield is thin (1.96%), profit margin is enjoyable (37.20%). P/B is 0.92, and operating margin is 61.69%. Target price is $347.65, which implies an about 21.7% upside potential. CME is trading 12.10% lower than the 52-week high. Debt-to assets ratio is nearly stable for the last five quarters. Although Cramer likes the performance of CME, he thinks that “there is too much competition between all these exchanges,” and he does not want to be “involved in a stock that is in that cohort."

Netflix, Inc. (NFLX): Netflix returned 171% in a year, and it is still a buy for Cramer. Although NFLX has a terrible trailing ratio of 80.86, and a forward P/E ratio of 42.96, it still has some pros to mention. Estimated annualized EPS growth for the next five years is 31.15%, which is quite reasonable when its 35.80% EPS growth of last 5 years is considered. ROA is 21.72%, while ROE is 89.39%. SMA50 is 7.17%, and SMA200 is 30.82%. Debt-to assets ratio is decreasing sharply for the last five quarters. NFLX has a profit margin of 7.91% with no dividend policy. However, target price indicates a 6.7% decrease potential, and insiders have been both selling and exercising options for a while. A pullback will create the appropriate environment to buy. Cramer thinks that it could “go to $300.” It might even go higher given the Street’s love for the stock, but I would not risk my money on Netflix. Redbox, which is available at almost every corner in town (even at gas stations), offers DVDs for $1. These machines will sooner or later create some serious challenges for Netflix.

Adobe Systems (ADBE): Cramer sees no reason to buy Adobe. As of the July 20 close, the tech stock was trading at a P/E ratio of 15.59, and a forward P/E ratio of 11.35. Analysts estimate an 11.76% EPS growth for the next five years, while earnings increased by 102.26% this year. Adobe pays no dividend yield. Profit margin (23.78%) is higher than the industry average of 13.8%. Target price implies a 29.6% increase potential, while the stock is trading 18.98% lower than 52-week high. Gross margin is 89.55%, whereas operating margin is 28.85%. Earnings increased by 62.62% this quarter. Insiders have been mostly exercising options for a while. Analysts give a 2.50 recommendation for the company (1=Buy, 5=Sell).

Ziopharm Oncology (ZIOP): Although the stock has a messed-up profit margin of -71947.0%, it returned 65.5% in a year. Insider transactions for the last six months have increased by 36.49%. Target price is $9.17, indicating a 56.4% increase potential. It is trading 25.35% lower than the 52-week high. The company has zero debt for the last five years. Although most of the technical indicators are horrible, ZIOP offers a solid return to investors anyway. The company has had strong momentum since May 2009, and I guess it will continue for a while. Cramer wants to do some research about the stock before making any calls on it. Out of 4 analysts covering the company, 3 have “Buy,” one has an “Outperform” rating. However, it is a very risky stock to invest it.

Source: A Look at Cramer's Highly Profitable Stock Picks July 20