Our Top 10 Growth Plays Of The Week: Part II

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Includes: ALB, CBL, EMR, NVS, PRU
by: Tactical Investor

"True humility is intelligent self respect which keeps us from thinking too highly or too meanly of ourselves. It makes us modest by reminding us how far we have come short of what we can be."

Ralph Sockman

See part I here.

We have selected what we believe to be the 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 favorite play. Almost all the stocks listed below are from our "favorite play list."

Out of all the top plays listed here Albemarle Corp. (ALB) is our play of choice for the following reasons:

  • Five-year dividend growth rate of 14%.
  • A good levered free cash flow of $241 million.
  • It sports a good ROE of 25%.
  • Net income has more than doubled from $178 million in 2009 to $436 million in 2011.
  • EBITDA has increased from $285 million in 2009 to $685 million in 2011.
  • Total cash flow from operating activities has increased from $358.3 million in 2009 to $487 million in 2011.
  • Annual EPS before NRI has increased from 2.40 in 2007 to $4.77 in 2011.
  • A decent quarterly revenue and earnings growth rate of 16.9% and 17% respectively.
  • It sports a very good current and quick ratio of 3.38 and 2.3 respectively.
  • An excellent interest coverage ratio of 15.
  • Cash flow per share has more than doubled from $2.96 per share in 2009 to $6.01 per share in 2011.
  • A great 3 year total return of 224%.
  • Consecutive dividend increases for 17 years.
  • A high beta of 2.01 which makes it a good candidate for covered writes.
  • $100K invested for 10 years would have grown to 463K.

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Albemarle Corp.

Industry: Specialty Chemicals

Levered Free Cash Flow : 241.08M

Beta= 2.01

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Growth

  1. Net income for the past three years
  2. Net Income 2009 = $178 million
  3. Net Income 2010 = $324 million
  4. Net Income 2011 = $436 million
  1. EBITDA 12/2011 = $685 million
  2. EBITDA 12/2010 = $513 million
  3. EBITDA 12/2009 = $285 million
  4. Net income Reported Quarterly = $8 million
  1. Total cash flow from operating activities
  2. 2009 = $358.53 million
  3. 2010 = $331.31 million
  4. 2011 = $487.36 million
  1. Cash Flow 12/2011 = 6.01 $/share
  2. Cash Flow 12/2010 = 4.63 $/share
  3. Cash Flow 12/2009 = 2.96 $/share
  1. Annual EPS before NRI 12/2011 = 4.77
  2. Annual EPS before NRI 12/2010 = 3.56
  3. Annual EPS before NRI 12/2009 = 1.86
  4. Annual EPS before NRI 12/2008 = 2.39
  5. Annual EPS before NRI 12/2007 = 2.4

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Performance

  1. ROE = 25.61%
  2. Return on Assets = 13.52%
  3. Quarterly Earnings Growth = 17%
  4. Quarterly Revenue Growth = 16.9%
  5. Total return last 3 years = 224.88%
  6. Total return last 5 years = 61.47%
  1. Price to Sales = 1.94
  2. Price to Book = 3.31
  3. Price to Tangible Book = 4.69
  4. Price to Cash Flow = 10.44
  5. Price to Free Cash Flow = 24.7
  1. Current Ratio 09/2011 = 3.38
  2. Current Ratio 5 Year Average = 3.11
  3. Quick Ratio = 2.3
  4. Cash Ratio = 1.33
  5. Interest Coverage 09/2011 = 15.1

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Dividend sustainability and history

  1. Payout Ratio 09/2011 = 0.15
  2. Payout Ratio 06/2011 = 0.14
  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 = -0.05
  6. Dividend yield 5 year average = 1.4%
  7. Dividend growth rate 3 year Average = 13.43%
  8. Dividend growth rate 5 year average = 14.03%
  9. Consecutive dividend increases = 17 years
  10. Paying dividends since = 1994

CBL & Associates Properties (CBL)

Industry: REITs

Levered Free Cash Flow: 356.15M

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Growth

  1. Net income for the past three years
  2. Net Income 2009 = $-15 million
  3. Net Income 2010 = $62 million
  4. Net Income 2011 = $134 million
  1. EBITDA 12/2011 = $713 million
  2. EBITDA 12/2010 = $712 million
  3. EBITDA 12/2009 = $597 million
  4. Net income Reported Quarterly = $118 million
  1. Total cash flow from operating activities
  2. 2009 = $431.64 million
  3. 2010 = $429.8 million
  4. 2011 = $441.84 million
  1. Cash Flow 12/2011 = 2.51 $/share
  2. Cash Flow 12/2010 = 2.73 $/share
  3. Cash Flow 12/2009 = 2.13 $/share
  1. Annual EPS before NRI 12/2011 = 2.05
  2. Annual EPS before NRI 12/2010 = 1.87
  3. Annual EPS before NRI 12/2009 = 2.52
  4. Annual EPS before NRI 12/2008 = 3.22
  5. Annual EPS before NRI 12/2007 = 3.1

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Performance

  1. ROE = 10.46%
  2. Return on Assets = 2.13%
  3. Quarterly Earnings Growth = 217.4%
  4. Quarterly Revenue Growth = -5.5%
  1. Key Ratios
  2. Price to Sales = 2.59
  1. Price to Book = 1.89
  2. Price to Tangible Book = 2.7
  3. Price to Cash Flow = 7.46
  4. Price to Free Cash Flow = 10.3
  1. Current Ratio 09/2011 = 0.54
  2. Current Ratio 5 Year Average = 0.55
  3. Quick Ratio = 0.54
  4. Cash Ratio = 0.19
  5. Interest Coverage 09/2011 = 2.79
  6. Total return last 3 years = 900%
  7. Total return last 5 years = -47.54%

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Dividend history and sustainability

  1. Payout Ratio 09/2011 = 0.38
  2. Payout Ratio 06/2011 = 0.39
  3. Payout Ratio 5 Year Average 09/2011 = 0.44
  4. Payout Ratio 5 Year Average 06/2011 = 0.45
  5. Change in Payout Ratio = -0.06
  1. Dividend yield 5 year average = 8.8%
  2. Dividend growth rate 3 year Average = -8.46%
  3. Dividend growth rate 5 year average = -5.36%
  4. Consecutive dividend increases = 1 years
  5. Paying dividends since = 1993

Notes

  • Net income has been trending upwards for the past three years; it increased from $-15 million in 2009 to $134 million in 2011.
  • EBITA has increased from $597 million in 2009 to $713 million in 2011 and cash flow per share has increased from $2.13 per share in 2009 to $2.51 in 2011.
  • It has a very impressive quarterly earnings growth rate of 217%.
  • A low payout ratio of 38% and good 5 year average payout ratio of 44%.
  • The percentage short of float is a high 13% and this makes it a candidate for a potential short squeeze.
  • A strong free cash flow yield of 16% and a good five-year dividend average of 8.8%.
  • A stunning 3 year total return of 900%.

Novartis AG (NYSE:NVS)

Industry: Pharmaceuticals

Levered Free Cash Flow: 11.52B

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Growth

  1. Net income for the past three years
  2. Net Income 2009 = $8400 million
  3. Net Income 2010 = $9794 million
  4. Net Income 2011 = $9113 million
  1. EBITDA 12/2011 = $11524 million
  2. EBITDA 12/2010 = $12394 million
  3. EBITDA 12/2009 = $10473 million
  4. Net income Reported Quarterly = $1175 million
  1. Total cash flow from operating activities
  2. 2008 = $9.67 billion
  3. 2009 = $12.2 billion
  4. 2010 = $14.07 billion
  1. Cash Flow 12/2011 = 5.52 $/share
  2. Cash Flow 12/2010 = 5.25 $/share
  3. Cash Flow 12/2009 = 3.72 $/share
  1. Annual EPS before NRI 12/2011 = 5.57
  2. Annual EPS before NRI 12/2010 = 5.13
  3. Annual EPS before NRI 12/2009 = 3.7
  4. Annual EPS before NRI 12/2008 = 3.59
  5. Annual EPS before NRI 12/2007 = 2.81

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Performance

  1. ROE = 20.1%
  2. Return on Assets = 10.81%
  3. Quarterly Earnings Growth = -45.8%
  4. Quarterly Revenue Growth = 3.7%
  1. Price to Sales = 2.27
  2. Price to Book = 2.02
  3. Price to Tangible Book = 33.82
  4. Price to Cash Flow = 10.02
  5. Price to Free Cash Flow = 23
  1. Current Ratio 09/2011 = 1.04
  2. Current Ratio 5 Year Average = 1.41
  3. Quick Ratio = 0.78
  4. Cash Ratio = 0.34
  5. Interest Coverage 09/2011 = 8.25
  6. Total return last 3 years = 61.29%
  7. Total return last 5 years = 14.29%

Dividend sustainability and history

  1. Payout Ratio 09/2011 = 0.36
  2. Payout Ratio 06/2011 = 0.37
  3. Payout Ratio 5 Year average 09/2011 = 0.34
  4. Payout Ratio 5 Year average 06/2011 = 0.33
  5. Change in Payout Ratio = 0.02
  1. Dividend yield 5 year average = 4%
  2. Dividend growth rate 3 year average = 13.01%
  3. Dividend growth rate 5 year average = 18.15%
  4. Consecutive dividend increases = 5 years
  5. Paying dividends since = 1992

Notes

  • A massive levered free cash flow of $11.5 billion.
  • Net income has increased from $8.4 billion in 2009 to $9.13 billion in 2011.
  • EBITDA has increased from $10.47 billion in 2009 to $11.5 billion in 2011.
  • Cash flow per share has increased from $3.72 in 2009 to $5.52 in 2011.
  • Annual EPS before NRI has increased from $2.81 in 2007 to $5.57 in 2011.
  • It sports a good ROE of 20%.
  • A 5 year sales growth of 10.5%.
  • A very good long term debt to equity ratio of 0.21.
  • It has a decent current ratio of 1.04; a weak quick ratio of 0.78 but this is shortfall is made up for by a good interest coverage ratio of 8.25.

Company: Emerson Electric Company (NYSE:EMR)

Levered Free Cash Flow = 2.64B

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Basic Key ratios

  1. Percentage Held by Insiders = 0.85
  2. Market Cap ($mil) = 38007

Growth

  1. Net Income ($mil) 12/2011 = 2480
  2. Net Income ($mil) 12/2010 = 2164
  3. Net Income ($mil) 12/2009 = 1724
  4. 12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 6.85
  5. Quarterly Net Income this Quarterly/ same Quarter year ago = -22.71
  1. EBITDA ($mil) 12/2011 = 4721
  2. EBITDA ($mil) 12/2010 = 3956
  3. EBITDA ($mil) 12/2009 = 3397
  4. Net Income Reported Quarterlytr ($mil) = 371
  5. Annual Net Income this Yr/ Net Income last Yr = 14.6
  6. Cash Flow ($/share) 12/2011 = 4.46
  7. Cash Flow ($/share) 12/2010 = 3.8
  8. Cash Flow ($/share) 12/2009 = 3.26
  1. Sales ($mil) 12/2011 = 24222
  2. Sales ($mil) 12/2010 = 21039
  3. Sales ($mil) 12/2009 = 20915
  1. Annual EPS before NRI 12/2007 = 2.66
  2. Annual EPS before NRI 12/2008 = 3.11
  3. Annual EPS before NRI 12/2009 = 2.27
  4. Annual EPS before NRI 12/2010 = 2.69
  5. Annual EPS before NRI 12/2011 = 3.24

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Dividend history

  1. Dividend Yield = 3.09
  2. Dividend Yield 5 Year Average =2.8%
  3. Annual Dividend 12/2011 = 1.38
  4. Annual Dividend 12/2010 = 1.34
  5. Forward Yield = 3.09
  6. Dividend 5 year Growth =9%

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.51
  2. Payout Ratio 5 Year Average 06/2011 = 0.47
  3. Change in Payout Ratio = 0.05

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = -14.82
  2. Next 3-5 Year Estimate EPS Growth rate = 11.5
  3. EPS Growth Quarterly(1)/Q(-3) = 120.64
  4. ROE 5 Year Average 06/2011 = 23.45
  5. Return on Investment 06/2011 = 15.7
  6. Debt/Total Cap 5 Year Average 06/2011 = 29.52
  7. Current Ratio 06/2011 = 1.39
  8. Current Ratio 5 Year Average = 1.43
  9. Quick Ratio = 1.12
  10. Cash Ratio = 0.42
  11. Interest Coverage = 14.20

Valuation

  1. Book Value Quarterly = 14.05
  2. Price/ Book = 3.68
  3. Price/ Cash Flow = 11.6
  4. Price/ Sales = 1.58
  5. EV/EBITDA 12 Mo = 8.47

Notes

  • It sports a huge levered free cash flow rate of $2.64 billion.
  • A good five year dividend growth rate of 9%.
  • A great long-term debt to equity ratio of 0.40.
  • Net income has increased from $1.7 billion in 2009 to $2.48 billion in 2011 and EBITA increased from $3.39 billion in 2009 to $4.7 billion in 2011.
  • Cash flow per share rose from $3.26 in 2009 to $4.46 in 2011.
  • A good five year ROE average of 24%.
  • A good interest coverage ratio of 14.2.
  • It has a good free cash flow yield of 6.63%.
  • $100K invested for 10 years would have grown to $241K.
  • It has a marvelous record of consecutively increasing dividends for 55 years.

Company: Prudential Financial, Inc. (PRU)

Levered Free Cash Flow = 5.27B

Basic Key ratios

  1. Percentage Held by Insiders = 0.12
  2. Number of Institutional Sellers 12 Weeks = 1

Growth

  1. Net Income ($mil) 12/2011 = 3666
  2. Net Income ($mil) 12/2010 = 3195
  3. Net Income ($mil) 12/2009 = 3124
  4. 12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 30.1
  5. Quarterly Net Income this Quarterly/ same Quarter year ago = 184.51
  1. EBITDA ($mil) 12/2011 = 5407
  2. EBITDA ($mil) 12/2010 = 4288
  3. EBITDA ($mil) 12/2009 = 1699
  4. Net Income Reported Quarterlytr ($mil) = 606
  5. Annual Net Income this Yr/ Net Income last Yr = 14.74
  6. Cash Flow ($/share) 12/2011 = 7.29
  7. Cash Flow ($/share) 12/2010 = 5.91
  8. Cash Flow ($/share) 12/2009 = 5.79
  1. Sales ($mil) 12/2011 = 39397
  2. Sales ($mil) 12/2010 = 30982
  3. Sales ($mil) 12/2009 = 27740
  1. Annual EPS before NRI 12/2007 = 7.54
  2. Annual EPS before NRI 12/2008 = 2.69
  3. Annual EPS before NRI 12/2009 = 5.58
  4. Annual EPS before NRI 12/2010 = 6.27
  5. Annual EPS before NRI 12/2011 = 6.41

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Dividend history

  1. Dividend Yield = 2.31
  2. Dividend Yield 5 Year Average =1.90%
  3. Annual Dividend 12/2011 = 1.45
  4. Annual Dividend 12/2010 = 1.15
  5. Forward Yield = 2.31
  6. Dividend 5 year Growth =6.8%

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.23
  2. Payout Ratio 5 Year Average 06/2011 = 0.17
  3. Change in Payout Ratio = 0.06

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = -2.97
  2. Next 3-5 Year Estimate EPS Growth rate = 9
  3. EPS Growth Quarterly(1)/Q(-3) = -110.67
  4. ROE 5 Year Average 06/2011 = 13.09
  5. Return on Investment 06/2011 = 5.23
  6. Debt/Total Cap 5 Year Average 06/2011 = 43.23
  1. Current Ratio 06/2011 = 0.17
  2. Current Ratio 5 Year Average = 0.24
  3. Quick Ratio = 0.17
  4. Cash Ratio = 0.16
  5. Interest Coverage Quarterly = 1.05

Valuation

  1. Book Value Quarterly = 80.45
  2. Price/ Book = 0.78
  3. Price/ Cash Flow = 8.63
  4. Price/ Sales = 0.75
  5. EV/EBITDA 12 Mo = 1.07

Notes

  • A very strong levered free cash flow of $5.27 billion.
  • Net income increased from $3.1 billion in 2009 to $3.66 billion in 2011 and EBITDA surged from $1.6 billion in 2009 to $5.4 billion in 2011.
  • Sales increased from $2.7 billion in 2009 to $3.9 billion in 2011 and Cash flow per share rose from $5.79 in 2009 to $7.29 in 2011.
  • It has a very strong quarterly earnings growth rate of 287% and a great quarterly revenue growth rate of 45%.
  • A very strong free cash flow yield of 41%.
  • A strong three year total return of 197%.
  • 100K invested for 10 years would have grown to $222K; if dividends were reinvested the rate of return would be higher.

Conclusion

In our opinion, the markets are rather overbought and need to let out some steam. Prudent investors would do well to wait for a strong pullback before committing funds to this market. A pullback in the 7-12% ranges would qualify as a strong pullback. In the interim, investors can sell covered calls to open up new streams of income, or if you are bullish on the stock sell naked puts.

Disclaimer

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.

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

Additional disclosure: EPS, Price, EPS surprise charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com. consensus estimate analysis table sourced from reuters.com.