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"The Wright brothers flew right through the smoke screen of impossibility."

Charles Kettering

We have selected what we believe to be 10 top plays out of the stocks we have reviewed for the week. We review five stocks per article and in each article, we choose our favourite play; almost all the stocks listed below are from our "favourite play list."

Out of the great plays here Terra Nitrogen Co., L.P. (NYSE: TNH) is our favorite for the following reasons:

  • It has good levered free cash flow of $311 million.
  • A high-quality yield of 8%
  • A strong quarterly revenue growth rate of 49%
  • A grand ROE of 211% and ROA of 106%
  • It sports a notable quarterly earning's growth rate of 48%
  • A great quarterly revenue growth rate of 40%
  • Five year dividend average of 7.7%
  • Five year dividend growth rate of 26%
  • A strong interest coverage ratio of 9.8
  • A 5 year sales growth average of almost 7%
  • A great long-term debt to equity ratio of 0.00
  • A very good current ratio of 6.94
  • An excellent quick ratio of 6.22
  • It also has a very good free cash flow yield of 12%
  • Cash flow has jumped from $8.68 a share in 2009 to over $29 a share in 2011.
  • Net income increased from $144 million in 2009 to $508 million in 2011.
  • Operating cash flow has increased from $169 million in 2009 to $513 million in 2011.
  • A 3 year total return of 106%
  • 100k invested in TNH would have grown into a stunning $4.3 million.

Terra Nitrogen Co., L.P. (NYSE: TNH)

Industry: Agricultural Chemicals

Levered Free Cash Flow: 311.64M

Growth

  1. Net income for the past three years
  2. Net Income 2009 = $144 million
  3. Net Income 2010 = $202 million
  4. Net Income 2011 = $508 million
  1. EBITDA 12/2011 = $528 million
  2. EBITDA 12/2010 = $219 million
  3. EBITDA 12/2009 = $161 million
  4. Net income Reported Quarterly = $288 million
  1. Total cash flow from operating activities
  2. 2009 = $168.7 million
  3. 2010 = $259.1 million
  4. 2011 = $513 million
  1. Cash Flow 12/2011 = 29.1 $/share
  2. Cash Flow 12/2010 = 11.83 $/share
  3. Cash Flow 12/2009 = 8.68 $/share
  1. Annual EPS before NRI 12/2011 = 15.9
  2. Annual EPS before NRI 12/2010 = 8.02
  3. Annual EPS before NRI 12/2009 = 5.4
  4. Annual EPS before NRI 12/2008 = 14.9
  5. Annual EPS before NRI 12/2007 = 10.9

Performance

  1. ROE = 211%
  2. Return on Assets = 106%
  3. Quarterly Earnings Growth = 48.8%
  4. Quarterly Revenue Growth = 40.7%
  1. Key Ratios
  2. Price to Sales = 5.29
  3. Price to Book = 15.7
  4. Price to Tangible Book = 15.7
  5. Price to Cash Flow = 7.85
  6. Price to Free Cash Flow = 73.5
  1. Current Ratio 09/2011 = 6.94
  2. Current Ratio 5 Year Average = 3.3
  3. Quick Ratio = 6.22
  4. Cash Ratio = 6.2
  5. Interest Coverage = 9.8

Dividend history and sustainability

  1. Payout Ratio 09/2011 = 1
  2. Payout Ratio 06/2011 = 1.08
  3. Payout Ratio 5 Year Average 09/2011 = 0.98
  1. Dividend yield 5 year average = 7.7%
  2. Dividend growth rate 3 year average = 39.65%
  3. Dividend growth rate 5 year average = 26.00%
  4. Consecutive dividend increases = 1 years
  5. Paying dividends since = 1997
  6. Total return last 3 years = 106.13%
  7. Total return last 5 years = 447.13%

Fresenius Medical Care AG & Co (NYSE: FMS)

Industry : Diagnostic & Health Related Services

Levered Free Cash Flow: 684.74M

Growth

Net income for the past three years

Net Income 2009 = $965 million

Net Income 2010 = $1065 million

  1. Net Income 2011 = $1177 million
  1. EBITDA 12/2011 = $2692 million
  2. EBITDA 12/2010 = $2452 million
  3. EBITDA 12/2009 = $2234 million
  4. Net income Reported Quarterly = $226 million
  1. Total cash flow from operating activities
  2. 2009 = $1.34 billion
  3. 2010 = $1.37 billion
  4. 2011 = $1.45 billion
  1. Cash Flow 12/2011 = 5.42 $/share
  2. Cash Flow 12/2010 = 4.97 $/share
  3. Cash Flow 12/2009 = 4.61 $/share
  1. Annual EPS before NRI 12/2011 = 3.54
  2. Annual EPS before NRI 12/2010 = 3.25
  3. Annual EPS before NRI 12/2009 = 2.99
  4. Annual EPS before NRI 12/2008 = 2.79
  5. Annual EPS before NRI 12/2007 = 2.43

Performance

  1. ROE = 13.07%
  2. Return on Assets = 5.69%
  3. Quarterly Earnings Growth = 14.4%
  4. Quarterly Revenue Growth = 4.9%
  1. Price to Sales = 1.6
  2. Price to Book = 2.41
  3. Price to Tangible Book = -10.33
  4. Price to Cash Flow = 12.54
  5. Price to Free Cash Flow = -15.3
  6. Total return last 3 years = 87.18%
  7. Total return last 5 years = 53.75%

Dividend history and Sustainability

  1. Current Ratio 09/2011 = 1.34
  2. Current Ratio 5 Year Average = 1.39
  3. Quick Ratio = 1.11
  4. Cash Ratio = 0.45
  5. Interest Coverage 09/2011 = 6.08
  1. Payout Ratio 09/2011 = 0.19
  2. Payout Ratio 06/2011 = 0.19
  3. Payout Ratio 5 Year Average 09/2011 = 0.2
  4. Payout Ratio 5 Year Average 06/2011 = 0.2
  5. Change in Payout Ratio = -0.02
  1. Dividend yield 5 year average = 1.1%
  2. Dividend growth rate 3 year Average = 1.26%
  3. Dividend growth rate 5 year average = 11.06%
  4. Paying dividends since = 1998

Federal Realty Investment Trust (NYSE: FRT)

Industry : REITs

Free Cash Flow: $199 million

Growth

  1. Net income for the past three years
  2. Net Income ($mil) 2009 = $98
  3. Net Income ($mil) 2010 = $123
  4. Net Income ($mil) 2011 = $144
  1. Total cash flow from operating activities
  2. 2009 = $256.77 million
  3. 2010 = $256.74 million
  4. 2011 = $244.72 million
  1. Cash And Cash Equivalents for the past 3 years
  2. 2009= $135.3 million
  3. 2010= $15.7 million
  4. 2011= $67.8 million

Performance

  1. Key Ratios
  2. Price to Sales = 11.13
  3. Price to Book = 5.09
  4. Price to Tangible Book = 5.09
  5. Price to Cash Flow = 41.20
  6. Price to Free Cash Flow = 403
  1. LT Debt to Equity = 1.75
  2. Total Debt to Equity = 0.87
  3. Interest Coverage = 2.24
  4. Asset Turnover = 0.15
  1. ROE = 10.50%
  2. Return on Assets = 4.2%
  3. Quarterly Earnings Growth = -5.8%

Dividend history and sustainability

  1. Dividend yield 5 year average = 3.54%
  2. Payout ratio = 0.69
  3. Dividend growth rate 3 year average = 2.8%
  4. Dividend growth rate 5 year average = 3.7%
  5. Consecutive dividend increases = 44 years
  6. Total return last 3 years = 149%
  7. Total return last 5 years = 13%

Intuitive Surgical Inc (NASDAQ: ISRG)

Industry: Medical Instruments & Equipment

Levered Free Cash Flow: 509.35M

Growth

  1. Net income for the past three years
  2. Net Income 2009 = $233 million
  3. Net Income 2010 = $382 million
  4. Net Income 2011 = $495 million
  1. EBITDA 12/2011 = $756 million
  2. EBITDA 12/2010 = $613 million
  3. EBITDA 12/2009 = $431 million
  4. Net income Reported Quarterly = $226 million
  1. Total cash flow from operating activities
  2. 2009 = $392.2 million
  3. 2010 = $545.8 million
  4. 2011 = $677.6 million
  1. Cash Flow 12/2011 = 13.89 $/share
  2. Cash Flow 12/2010 = 10.75 $/share
  3. Cash Flow 12/2009 = 7.3 $/share
  1. Annual EPS before NRI 12/2011 = 12.32
  2. Annual EPS before NRI 12/2010 = 9.47
  3. Annual EPS before NRI 12/2009 = 6.23
  4. Annual EPS before NRI 12/2008 = 5.12
  5. Annual EPS before NRI 12/2007 = 3.7

Performance

  1. ROE = 20.77%
  2. Return on Assets = 17.96%
  3. Quarterly Earnings Growth = 24.8%
  4. Quarterly Revenue Growth = 27.6%
  1. Key Ratios
  2. Price to Sales = 11.95
  3. Price to Book = 7.81
  4. Price to Tangible Book = 8.54
  5. Price to Cash Flow = 38.14
  6. Price to Free Cash Flow = 35.3
  1. Current Ratio 09/2011 = 4.57
  2. Current Ratio 5 Year Average = 4.7
  3. Quick Ratio = 4.22
  4. Cash Ratio = 3.3
  1. Total return last 3 years = 425.48%
  2. Total return last 5 years = 374.38%

Notes

This plays comes in at a close third. $100K invested for 10 years would have grown to $2.3 million. It also sports the following attractive traits:

  1. A good earning's growth rate of 24.8%.
  2. A strong revenue growth rate of 27.6%
  3. Recurring revenues continue to grow as a proportion of total sales; they increased 30% in fiscal 2011 and accounted for 56% of total revenues during the year.
  4. Operating income is projected to rise in the range of 39%-40%.
  5. $100K invested for 10 years would have grown to $2.3 million dollars

Company: Sohu.Com Inc (NASDAQ:SOHU)

Levered Free Cash Flow = 93.06 million

Basic Key ratios

  1. Percentage Held by Insiders = 21.05
  2. Market Cap ($mil) = 2052

Growth

  1. Net Income ($mil) 12/2011 = 163
  2. Net Income ($mil) 12/2010 = 149
  3. Net Income ($mil) 12/2009 = 148
  4. 12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 9.5
  5. Quarterly Net Income this Quarterly/ same Quarter year ago = -38.93
  1. EBITDA ($mil) 12/2011 = 373
  2. EBITDA ($mil) 12/2010 = 261
  3. EBITDA ($mil) 12/2009 = 228
  4. Net Income Reported Quarterly ($mil) = 27
  5. Annual Net Income this Yr/ Net Income last Yr = 9.5
  1. Cash Flow ($/share) 12/2011 = 7.55
  2. Cash Flow ($/share) 12/2010 = 4.61
  3. Cash Flow ($/share) 12/2009 = 4.32
  1. Sales ($mil) 12/2011 = 852
  2. Sales ($mil) 12/2010 = 613
  3. Sales ($mil) 12/2009 = 515
  1. Annual EPS before NRI 12/2007 = 0.9
  2. Annual EPS before NRI 12/2008 = 3.96
  3. Annual EPS before NRI 12/2009 = 3.57
  4. Annual EPS before NRI 12/2010 = 3.62
  5. Annual EPS before NRI 12/2011 = 4.62

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = -36.91
  2. Next 3-5 Year Estimate EPS Growth rate = 18.57
  3. EPS Growth Quarterly(1)/Q(-3) = -119.63
  1. ROE 5 Year Average 06/2011 = 24.93
  2. Return on Investment 06/2011 = 16.42
  3. Debt/Total Cap 5 Year Average 06/2011 = 0.22
  1. Current Ratio 06/2011 = 2.93
  2. Current Ratio 5 Year Average = 3.19
  3. Quick Ratio = 2.93
  4. Cash Ratio = 2.67
  5. Interest Coverage Quarterly = N/A

Valuation

  1. Book Value Quarterly = 32.02
  2. Price/ Book = 1.68
  3. Price/ Cash Flow = 7.13
  4. Price/ Sales = 2.41
  5. EV/EBITDA 12 Mo = 3.28

Notes

This is another excellent play that comes in at a very close second to TNH. $100K invested would have grown to $4.16 million.

Additional bullish factors

  1. It has a good free cash flow yield of 9.62%
  2. Insiders have a decent-sized stake in the company; percentage held by insiders is 21.05%
  3. Cash flow per share has surged from $4.32 in 2009 to $7.55 in 2011 and sales have increased by 65% from $515 million in 2009 to $852 million in 2011.
  4. Projected EPS growth rate for the next 3-5 years is 18.57% and it has a five year sales growth rate of 44.79%
  5. Cash flow from operating activities increased from $235 million in 2009 to $370 million in 2011.

Conclusion

Investing in dividend paying stocks makes sense for the following reasons

  1. A steady income without have to sell your position
  2. Provides one with more financial flexibility
  3. It's a good hedge against inflation
  4. Cash Flow regardless of market direction.
  5. Quicker compounding provides one with the chance of meeting ones financial goals faster.
  6. Provides one with the two potential sources of income; one from capital gains and the other from the dividends paid out
  7. Additional streams of income can be opened by selling covered calls.
  8. If you are bullish on a specific dividend stock you can open up an additional stream of income by selling puts. If the stock trades below your strike price you get into the stock at the price you wanted; actually the price is lower after you subtract the premium you received. If it does not trade below the strike price you get paid to wait and walk away with the premium.

EPS, EPS surprise, broker recommendations, and price and consensus charts sourced from zacks.com. Earning's estimates and growth rate charts sourced from dailyfinance.com. Free cash flow yield, income from cont operations, and revenue growth sourced from Ycharts.com.

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

Additional disclosure: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware

Source: 10 Top Growth Plays Of The Week, Part II