Are you looking for mid-sized companies that still have room to grow? Looking for dividends you can rely on? Do you prefer companies with strong profits? Interested in companies with minimal debt? Here are some interesting ideas to get you started.
Return on equity [ROE] is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.
The debt/equity ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
We first looked for mid cap dividend stocks. Next, we then screened for businesses that have been able to maintain a sound level of profitability for shareholders (ROE [TTM]>30%)(1-year fiscal EPS growth rate>10%). Next, we then screened for businesses that have maintained a sound capital structure (D/E ratio<.3). We did not screen out any sectors.
Do you think these mid-cap stocks should have higher valuations? Use our list to help with your own analysis.
1) Polaris Industries, Inc. (PII)
Polaris Industries, Inc. has a dividend yield of 1.84%, return on equity of 51.22%, earnings per share growth of 49.68% and a debt/equity ratio of 0.20. The short interest was 5.39% as of 05/02/2012. Polaris Industries Inc., together with its subsidiaries, engages in designing, engineering, manufacturing, and marketing off-road vehicles, snowmobiles, and on-road vehicles primarily in the United States, Canada, and Europe. Its off-road vehicles include all-terrain vehicles and side-by-side vehicles for recreational and utility use; snowmobiles consisting of various models, including independent front suspension, long travel rear suspension, hydraulic disc brakes, liquid cooling for brakes, and a three cylinder engine, as well as a four-stroke engine; and on-road vehicles comprise V-twin cruiser motorcycles. The company also produces replacement parts and accessories, such as winches, bumper/brushguards, plows, racks, mowers, tires, pull-behinds, cabs, cargo box accessories, tracks, and oil for off-road vehicles; covers, traction products, reverse kits, electric starters, tracks, bags, windshields, oil, and lubricants for snowmobiles; and saddle bags, handlebars, backrests, exhaust, windshields, seats, oil, and various chrome accessories for motorcycles.
2) Quality Systems Inc. (QSII)
|Industry:||Healthcare Information Services|
Quality Systems Inc. has a dividend yield of 1.87%, return on equity of 32.01%, earnings per share growth of 25.93% and a debt/equity ratio of 0.00. The short interest was 11.29% as of 05/02/2012. Quality Systems, Inc., together with its subsidiaries, develops and markets healthcare information systems in the United States. The company operates through four divisions: QSI Dental, NextGen, Inpatient Solutions, and Practice Solutions. The QSI Dental division develops, markets, and supports software suites for dental practices; and practice management software, which is designed to automate and streamline various administrative functions required for operating a medical or dental practice.
3) FactSet Research Systems Inc. (FDS)
|Industry:||Information & Delivery Services|
FactSet Research Systems Inc. has a dividend yield of 1.03%, return on equity of 32.02%, earnings per share growth of 15.43% and a debt/equity ratio of 0.00. The short interest was 8.99% as of 05/02/2012. FactSet Research Systems Inc. provides financial and economic information to investment community worldwide. The company offers fundamental financial data on various companies, analytical applications, and client services to the portfolio managers, research and performance analysts, risk managers, marketing professionals, sell-side equity research professionals, investment bankers, and fixed income professionals. FactSet's applications provide users access to company analysis, multicompany comparisons, industry analysis, company screening, portfolio analysis, predictive risk measurements, alphatesting, portfolio optimization and simulation, news and quotes, and tools to value and analyze fixed income securities and portfolios.
4) DSW Inc. (DSW)
DSW Inc. has a dividend yield of 1.06%, return on equity of 34.82%, earnings per share growth of 803.37% and a debt/equity ratio of 0.00. The short interest was 4.90% as of 05/02/2012. DSW Inc., together with its subsidiaries, operates as a branded footwear and accessories specialty retailer in the United States. It offers a range of branded and designer dresses; and casual and athletic footwear and accessories for women and men through its DSW stores and dsw.com.
5) CH Robinson Worldwide Inc. (CHRW)
|Industry:||Air Delivery & Freight Services|
CH Robinson Worldwide Inc. has a dividend yield of 2.17%, return on equity of 35.63%, earnings per share growth of 12.35% and a debt/equity ratio of 0.00. The short interest was 3.47% as of 05/02/2012. C.H. Robinson Worldwide, Inc., a third-party logistics company, provides freight transportation services and logistics solutions to companies in various industries worldwide.
6) Buckle Inc. (BKE)
Buckle Inc. has a dividend yield of 1.73%, return on equity of 42.74%, earnings per share growth of 11.66% and a debt/equity ratio of 0.00. The short interest was 25.62% as of 05/02/2012. The Buckle, Inc. operates as a retailer of casual apparel, footwear, and accessories for young men and women in the continental United States. Its casual apparel products include denims, casual bottoms, tops, sportswear, and outerwear. The company also sells its products through operating buckle.
*Company profiles were sourced from Finviz. Financial data was sourced from Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.