While most market pundits in the media continue to overlook mid-cap companies we aren’t. A few have impressive operating profit margins that don't depend on heavy leverage. Now we specifically looked at the operating margin because it illustrates a company’s pricing strategy and operating efficiency. While it won’t tell an investor everything about the company it does provide an idea on how a company is performing in the current market environment.
We ran a screen for mid-cap companies that illustrate strong profitability (1-year fiscal operating margin>15%). From this narrowed pool we then screened for companys that maintained low/moderate leverage (financial leverage<3).
The list is ranked from lowest to highest by the 1-year fiscal operating margin:
1. EXCO Resources, Inc. (XCO)
Sector | Energy |
Industry | Oil and Gas E&P |
Market Cap | $2622 million |
Beta | 1.8 |
Analyst Sentiment | 8/13-List Hold/Neutral (Neutral) |
The company develops and produces oil and natural gas in North America. XCO’s 1-year fiscal operating margin is 107.95%. The company’s financial leverage is 2.22. The short interest for the company is 6.1% as of 8/15/2011.
2. Cheniere Energy Partners LP (CQP)
Sector | Energy |
Industry | Oil and Gas Midstream |
Market Cap | $2479 million |
Beta | 0.32 |
Analyst Sentiment | None |
The company owns and operates two natural gas terminals in Louisiana. CQP’s 1-year fiscal operating margin is 70.33%. The company’s financial leverage is 2.04. The short interest for the company is 2% as of 8/15/2011.
3. Renaissance Re Holdings, Ltd. (RNR)
Sector | Financial Services |
Industry | Insurance - Reinsurance |
Market Cap | 3155 million |
Beta | 0.41 |
Analyst Sentiment | 8/13-List Hold/Neutral (Neutral) |
The company provides reinsurance and insurance services worldwide. RNR’s 1-year fiscal operating margin is 64.7%. The company’s financial leverage is 2.75. The short interest for the company is 4% as of 8/15/2011.
4. El Paso Pipeline Partners LP (EPB)
Sector | Energy |
Industry | Oil and Gas Midstream |
Market Cap | $7164 million |
Beta | 0.2 |
Analyst Sentiment | 12/15-List Buy/Outperform (Bullish) |
The company owns and operates natural gas pipelines and storage facilities in the United States. The company’s 1-year fiscal operating margin is 55.58%. The company’s financial leverage is 2.26. The short interest for the company is 1% as of 8/15/2011.
We hope this helps investors as they do their own due diligence on mid cap companies that illustrate strong profitability.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
