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In the learning to fish series, we provide investors with suggested guidelines for choosing a potential candidate and one candidate is selected as our play of choice. We provide reasons for this choice and in doing so hope to impart some understanding to those who are new to the field of investing. A lot of ratios will be used throughout this article, and it would be best for investors to get a handle on some of these ratios as they could prove to be very useful to the selection process. Investors would do well to understand the selection process involved in coming up with these picks. This information can be accessed here. “Our suggested guidelines when searching for new investment ideas." These are not absolute rules but suggestions to get the novice investor started. The criteria can be adjusted to suit your own specific style of trading.

Reasons to be bullish on Terra Nitrogen (NYSE:TNH):

  • A very strong yield of 8%
  • A strong five year dividend growth rate of 17%
  • A good five year dividend average of 8.55%
  • Operating margin 36%
  • Profit margins 63%
  • It has a strong ROE of 189%
  • Net income soared from $144 million in 2009 to $508 million in 2011
  • Cash flow per share more than tripled from $8.69 in 2009 to $29.10 in 2011
  • EBITDA exploded upwards from $161 million in 2009 to $528 million in 2011
  • Sales jumped from $508 in 2009 to $799 in 2011
  • Annual EPS before NRI increased from $10.90 in 2007 to $15.90 in 2011
  • A very good ROA of 100%
  • A 5 year sales growth rate of 5%
  • A long-term debt to equity ratio of 0.00
  • A very strong relative strength score of 96 out of a possible 100
  • A five-year cash flow average of $13.26
  • An excellent current ratio of 4.6
  • A splendid quick ratio of 6.22
  • A very good five year ROE average of 132%
  • $100K invested for 10 years would have grown to $4.3 million

Company: Terra Nitrogen

Basic Key ratios

  1. Relative Strength 52 weeks = 96
  2. Cash Flow 5 -year Average = 13.26

Growth

  1. Net Income ($mil) 12/2011 = 508
  2. Net Income ($mil) 12/2010 = 202
  3. Net Income ($mil) 12/2009 = 144
  1. EBITDA ($mil) 12/2011 = 528
  2. EBITDA ($mil) 12/2010 = 219
  3. EBITDA ($mil) 12/2009 = 161
  4. Cash Flow ($/share) 12/2011 = 29.1
  5. Cash Flow ($/share) 12/2010 = 11.83
  6. Cash Flow ($/share) 12/2009 = 8.69
  1. Sales ($mil) 12/2011 = 799
  2. Sales ($mil) 12/2010 = 565
  3. Sales ($mil) 12/2009 = 508
  1. Annual EPS before NRI 12/2007 = 10.9
  2. Annual EPS before NRI 12/2008 = 14.9
  3. Annual EPS before NRI 12/2009 = 5.4
  4. Annual EPS before NRI 12/2010 = 8.02
  5. Annual EPS before NRI 12/2011 = 15.9

Dividend history

  1. Dividend Yield = 8.00%
  2. Dividend Yield 5 Year Average 12/2011 = 8.55
  3. Dividend 5 year Growth = 17%

Dividend sustainability

  1. Payout Ratio 09/2011 = 1.08
  2. Payout Ratio 5 Year Average 12/2011 = 0.99

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = N/A
  2. EPS Growth Quarterly(1)/Q(-3) = -124.01
  3. 5 Year History EPS Growth 12/2011 = 3.21
  4. ROE 5 Year Average 12/2011 = 132.33
  1. Current Ratio 12/2011 = 4.63
  2. Current Ratio 5 Year Average = 3.44
  3. Quick Ratio = 6.22
  4. Cash Ratio = 6.2
  5. Interest Coverage Quarterly = N/A

Company: Amazon.Com Inc (NASDAQ:AMZN)

Growth

  1. Net Income ($mil) 12/2011 = 631
  2. Net Income ($mil) 12/2010 = 1152
  3. Net Income ($mil) 12/2009 = 902
  1. EBITDA ($mil) 12/2011 = 2082
  2. EBITDA ($mil) 12/2010 = 2104
  3. EBITDA ($mil) 12/2009 = 1573
  4. Cash Flow ($/share) 12/2011 = 3.74
  5. Cash Flow ($/share) 12/2010 = 3.83
  6. Cash Flow ($/share) 12/2009 = 2.96
  1. Sales ($mil) 12/2011 = 48077
  2. Sales ($mil) 12/2010 = 34204
  3. Sales ($mil) 12/2009 = 24509
  1. Annual EPS before NRI 12/2007 = 1.12
  2. Annual EPS before NRI 12/2008 = 1.49
  3. Annual EPS before NRI 12/2009 = 2.04
  4. Annual EPS before NRI 12/2010 = 2.53
  5. Annual EPS before NRI 12/2011 = 1.34

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 26.27
  2. EPS Growth Quarterly(1)/Q(-3) = 136.36
  3. 5 Year History EPS Growth 12/2011 = 16.2
  4. ROE 5 Year Average 12/2011 = 30.45
  5. Return on Investment 12/2011 = 5.43
  6. Debt/Total Cap 5 Year Average 12/2011 = 20.05
  7. Current Ratio 12/2011 = 1.16
  8. Current Ratio 5 Year Average = 1.38
  9. Quick Ratio = 0.84
  10. Cash Ratio = 0.67
  11. Interest Coverage Quarterly = 5

Valuation

  1. Book Value Quarterly = 15.98
  2. Price/ Book = 14.25
  3. Price/ Cash Flow = 60.94
  4. Price/ Sales = 2.02
  5. EV/EBITDA 12 Mo = 48.26

Company: Williams Cos (NYSE:WMB)

Basic Key ratios

  1. Percentage Held by Insiders = 0.63
  2. Number of Institutional Sellers 12 Weeks = 6

Growth

  1. Net Income ($mil) 12/2011 = 376
  2. Net Income ($mil) 12/2010 = -1097
  3. Net Income ($mil) 12/2009 = 285
  1. EBITDA ($mil) 12/2011 = 3441
  2. EBITDA ($mil) 12/2010 = 2532
  3. EBITDA ($mil) 12/2009 = 2657
  4. Cash Flow ($/share) 12/2011 = 4.07
  5. Cash Flow ($/share) 12/2010 = 3.96
  6. Cash Flow ($/share) 12/2009 = 3.54
  1. Sales ($mil) 12/2011 = 7930
  2. Sales ($mil) 12/2010 = 6638
  3. Sales ($mil) 12/2009 = 5278
  1. Annual EPS before NRI 12/2007 = 1.75
  2. Annual EPS before NRI 12/2008 = 2.15
  3. Annual EPS before NRI 12/2009 = 0.94
  4. Annual EPS before NRI 12/2010 = 1.28
  5. Annual EPS before NRI 12/2011 = 1.23

Dividend history

  1. Dividend Yield = 3.3
  2. Dividend Yield 5 Year Average 12/2011 = 2.16
  3. Dividend 5 year Growth 12/2011 = 18.75

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.67
  2. Payout Ratio 5 Year Average 12/2011 = 0.38

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 1.8
  2. EPS Growth Quarterly(1)/Q(-3) = -108.33
  3. 5 Year History EPS Growth 12/2011 = -5.58
  4. ROE 5 Year Average 12/2011 = 11.51
  5. Return on Investment 12/2011 = 5.77
  6. Debt/Total Cap 5 Year Average 12/2011 = 51.75
  1. Current Ratio 06/2011 = 1.13
  2. Current Ratio 5 Year Average = 1.31
  3. Quick Ratio = 1.03
  4. Cash Ratio = 0.65
  5. Interest Coverage Quarterly = 4.26

Company: McDonald's Corp (NYSE:MCD)

Growth

  1. Net Income ($mil) 12/2011 = 5503
  2. Net Income ($mil) 12/2010 = 4946
  3. Net Income ($mil) 12/2009 = 4551
  1. EBITDA ($mil) 12/2011 = 9920
  2. EBITDA ($mil) 12/2010 = 8727
  3. EBITDA ($mil) 12/2009 = 8176
  4. Cash Flow ($/share) 12/2011 = 6.76
  5. Cash Flow ($/share) 12/2010 = 5.9
  6. Cash Flow ($/share) 12/2009 = 5.21
  1. Sales ($mil) 12/2011 = 27006
  2. Sales ($mil) 12/2010 = 24075
  3. Sales ($mil) 12/2009 = 22745
  1. Annual EPS before NRI 12/2007 = 1.93
  2. Annual EPS before NRI 12/2008 = 3.66
  3. Annual EPS before NRI 12/2009 = 3.98
  4. Annual EPS before NRI 12/2010 = 4.59
  5. Annual EPS before NRI 12/2011 = 5.27

Dividend history

  1. Dividend Yield = 3.00
  2. Dividend Yield 5 Year Average 12/2011 = 2.94
  3. Dividend 5 year Growth 12/2011 = 20.48

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.52
  2. Payout Ratio 5 Year Average 12/2011 = 0.5

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 9.93
  2. EPS Growth Quarterly(1)/Q(-3) = -106.96
  3. 5 Year History EPS Growth 12/2011 = 15.54
  4. ROE 5 Year Average 12/2011 = 31.57
  5. Return on Investment 12/2011 = 21.47
  6. Debt/Total Cap 5 Year Average 12/2011 = 42.21
  7. Current Ratio 12/2011 = 1.17
  8. Current Ratio 09/2011 = 1.17
  9. Current Ratio 06/2011 = 1.26
  10. Current Ratio 5 Year Average = 1.18
  11. Quick Ratio = 1.22
  12. Cash Ratio = 0.84
  13. Interest Coverage Quarterly = 15.33

Valuation

  1. Book Value Quarterly = 14.39
  2. Price/ Book = 6.39
  3. Price/ Cash Flow = 13.59
  4. Price/ Sales = 3.41
  5. EV/EBITDA 12 Mo = 10.42

Company: Coca Cola Co (NYSE:KO)

Growth

  1. Net Income ($mil) 12/2011 = 8572
  2. Net Income ($mil) 12/2010 = 11809
  3. Net Income ($mil) 12/2009 = 6824
  1. EBITDA ($mil) 12/2011 = 13810
  2. EBITDA ($mil) 12/2010 = 16419
  3. EBITDA ($mil) 12/2009 = 10537
  4. Cash Flow ($/share) 12/2011 = 4.79
  5. Cash Flow ($/share) 12/2010 = 4.13
  6. Cash Flow ($/share) 12/2009 = 3.61
  1. Sales ($mil) 12/2011 = 46542
  2. Sales ($mil) 12/2010 = 35119
  3. Sales ($mil) 12/2009 = 30990
  1. Annual EPS before NRI 12/2007 = 2.7
  2. Annual EPS before NRI 12/2008 = 3.15
  3. Annual EPS before NRI 12/2009 = 3.06
  4. Annual EPS before NRI 12/2010 = 3.49
  5. Annual EPS before NRI 12/2011 = 3.84

Dividend history

  1. Dividend Yield = 2.6
  2. Dividend Yield 5 Year Average 12/2011 = 2.91
  3. Dividend 5 year Growth 12/2011 = 8.16

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.53
  2. Payout Ratio 5 Year Average 12/2011 = 0.52

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 7.86
  2. EPS Growth Quarterly(1)/Q(-3) = -103.49
  3. 5 Year History EPS Growth 12/2011 = 8.5
  4. ROE 5 Year Average 12/2011 = 30.46
  5. Return on Investment 12/2011 = 19.01
  6. Debt/Total Cap 5 Year Average 12/2011 = 18.17
  7. Current Ratio 12/2011 = 1.13
  8. Current Ratio 5 Year Average = 1.09
  9. Quick Ratio = 0.92
  10. Cash Ratio = 0.72
  11. Interest Coverage Quarterly = 31.97

Valuation

  1. Book Value Quarterly = 14.67
  2. Price/ Book = 5.28
  3. Price/ Cash Flow = 16.16
  4. Price/ Sales = 3.72
  5. EV/EBITDA 12 Mo = 12.75

Conclusion

The markets are oversold on a short-term basis, and it would not surprise us if they mounted some sort of relief rally before trending downwards again. Long-term investors can use strong pullbacks to slowly start deploying money into long-term investments. A great way to get into a stock at a price of your choosing is to sell puts at strikes you would not mind owning the stock at. Investors looking for other investment ideas might find these two articles to be of interest: Is Citigroup A Good Long-Term Investment? and Is It Worth Getting Aboard The Starbucks Train?

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.

Source: 5 Splendid Plays To Consider

Additional disclosure: EPS and Price vs. industry charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com. Revenue and growth estimate data sourced from dailyfinance.com Option table sourced from yahoo finance.