5 Analyst Favorites With 5 Star Ratings

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 |  Includes: AAPL, AVT, CELG, CHD, COH
by: Leonid Kanopka

I always like to look at how the analysts are rating different companies to get an idea of what is considered "profitable". Although I review ideas of different analysts, I would not endorse "running with the crowd", or your returns will look like such. Even though I do not take analyst ratings as fact, I do like to see different opinions and where certain companies are ranked compared to the market or their peers. Below are five "buy" stocks that are favored highly by analysts along with my analysis of each:

  1. Apple, Inc. (NASDAQ:AAPL) is in the technology sector of the market. It boasts a 5 star S&P rating, and is an obvious choice for many investors. Apple Inc. designs, manufactures, and markets a range of personal computers, mobile communication and media devices, and portable digital music players. Apple also sells a range of related software, services, peripherals, networking solutions, and third-party digital content and applications. Within a 10y time period Apple has consistently beat the market. And not by a fraction- but exponentially. Below are the growth rates for the past 10 years for Apple:

Period

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Equity

Sep '10

48.41%

44.18%

46.31%

45.41%

42.44%

41.58%

37.00%

31.89%

28.17%

23.90%

EPS

Sep '10

66.85%

49.48%

56.80%

60.73%

57.77%

88.29%

107.98%

89.79%

100.00%

30.11%

Click to enlarge

With this data it is easy to see a consistent pattern of growth, and why it is strongly favored by analysts. However, there is one thing that does bring uncertainty to this stock, and unfortunately it is a big uncertainty. The tragic passing of Steve Jobs puts this company on a heavy watch as far as I'm concerned. Steve Jobs had a vision and only time will tell if that vision will continue. Either way, Apple is most definitely off to a good start with quarterly earnings growth YOY of 124.70%, 28.40B in cash, and absolutely no debt. Apple has an EPS currently of 25.28, which is substantially higher than previous quarters, and signals strong growth. It has a P/E of 16.63x, which is higher than the industry average of 14.63x. It is safe to say that Apple is a strong buy and an obvious choice for investment, but it must stay on the radar of uncertainty. Hopefully the new CEO, Tim Cook, can keep the fire burning.

  1. Celgene Corporation (NASDAQ:CELG) is a global integrated biopharmaceutical company. The company is primarily engaged in the discovery, development and commercialization of therapies designed to treat cancer and related diseases such as immune-modulation and intracellular signaling pathways in hematology, oncology, and immune-inflammatory diseases. The S&P rating is 5 stars and the stock is currently trading at $66.29 with a 1 year price target of $71.86 (8.4% upside potential). I like the fact that with this company there has been a lot of insider activity recently: CFO Jacqualyn Fouse, Directors Rodman Drake and Ernest Mario, and CEO Robert Hugin have all been buying up shares of Celgene lately at prices of $52-$60. This shows strong potential and insider belief in the organization. I am also impressed with the ROA of 10.93% and ROE of 18.76%. One thing that did catch my attention to watch out for is the 52-week price change of 14.51%, and a high of $66.98. Celgene shares are currently trading at their 52-week highs, which could signal pressure to dump shares, But overall, I think this company has room to grow to 2008 levels at $80.
  2. Avnet, Inc. (NYSE:AVT) is an industrial distributor of electronic components, enterprise computer and storage products and embedded subsystems. The company distributes electronic components, computer products and software as received from its suppliers or with assembly or other value added by Avnet. Avnet has a 5 star S&P rating, which has pushed its shares toward the top of its 52-week price range of $23.69-$38 (currently trading at $30.5). The current P/E ratio is 7x with a forward P/E of 7.21x, which does signal some growth potential. Another reason I am bullish with Avnet is because it has outperformed its industry and does not show much signs of slowing down. The only red flag is total debt on its books amounting to $1.52B, even though EPS is 4.34 compared to the industry average of 0.43. Another reason why investors should like this stock is the fact that Cramer ranked this stock a Buy.

  3. Coach, Inc. (NYSE:COH) is a marketer of fine accessories and gifts for women and men. Coach’s product offerings include women’s and men’s bag, accessories, business cases, footwear, wearables, jewelry, sun wear, travel bags, watches and fragrance. Despite its 5 star S&P rating, I found it useful to compile a table of EPS from 2001. What I noticed was consistent growth with no sign of a slowdown. Coach has a 9 out of 10 year winning record, and the only year there was no growth in EPS was during the 2009 recession, and EPS were still positive at 1.91.

EPS

0.19

0.24

0.39

0.62

0.86

1.19

1.69

2.17

1.91

2.33

2.9

growth rate

26.32%

62.50%

58.97%

38.71%

38.37%

42.02%

28.40%

-11.98%

21.99%

25.32%

Click to enlarge

Another reason why Coach stands out is 702.04M in cash on its balance sheet, with only 24.16M in total debt. This shows the company is very good at growing its business without taking on too much debt. More refreshing news is the fact that Coach has also been paying out dividends, currently yielding 1.49%, and ROI is 44.26 compared to the industry average of 16.83. Overall, this company deserves its 5 star rating, and I see future growth.

  1. Church & Dwight Co., Inc (NYSE:CHD) develops, manufactures, and markets a range of household, personal care and specialty products, which puts it in the consumer goods sector of the market. Church & Dwight offers a 1.52% dividend yield, and it is currently trading at $44.94 with a 5 star S&P rating. The 52-week price range is $32.00 - $46.29, which could signal some resistance in upward momentum. However, the reason why this stock is trading towards the top of its 52-week high is because it is a fundamentally sound company with a good long term vision. Church & Dwight has new products planned for launch across several categories, of which the health category has the highest potential for growth and margin expansion. Current EPS is 1.95 compared to an industry average of 0.70, and the P/E ratio is 23.08. I also like the fact that this company has a portfolio of well-known brands, some of which have served consumers for a century, and perhaps will serve for another.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.