Mid-cap companies offer investors an interesting opportunity: they can offer high growth potential, similar to that of smaller-cap companies, yet they can also lack the reliability and predictability of large cap peers. To hone in on intelligent mid-cap investments, today we focused on companies possessing strong track records of profitability, while also garnering favorable analyst recommendations. We arrived at a short, but intriguing list of companies worthy of more research and analysis.
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.
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.
We first looked for mid cap basic materials stocks. We then looked for businesses that have shown strong bottom line growth over the last year (1-year fiscal EPS growth rate>10%)(ROE [TTM]>30%). We next screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3).
Do you think these mid-cap stocks have strong enough fundamentals to move higher? Use our screened list as a starting point for your own analysis.
1) Celanese Corporation (CE)
|Industry:||Chemicals - Major Diversified|
Celanese Corporation has a Earnings Per Share Growth Rate of 41.74%, a Return on Equity of 48.64%, and a Analysts' Rating of 1.90. The short interest was 1.44% as of 07/22/2012. Celanese Corporation, a technology and specialty materials company, engages in manufacture and sale of value-added chemicals, thermoplastic polymers, and other chemical-based products. It operates through four business segments: Advanced Engineered Materials, Consumer Specialties, Industrial Specialties, and Acetyl Intermediates. The Advanced Engineered Materials segment offers specialty polymers for application in automotive, medical, and electronics products, as well as other consumer and industrial applications.
2) Eastman Chemical Co. (EMN)
|Industry:||Chemicals - Major Diversified|
Eastman Chemical Co. has a Earnings Per Share Growth Rate of 59.67%, a Return on Equity of 33.00%, and a Analysts' Rating of 1.60. The short interest was 5.69% as of 07/22/2012. Eastman Chemical Company, a chemical company, engages in the manufacture and sale of chemicals, plastics, and fibers in the United States and internationally. The company operates in four segments: Coatings, Adhesives, Specialty Polymers, and Inks (CASPI); Fibers; Performance Chemicals and Intermediates (NYSE:PCI); and Specialty Plastics. The CASPI segment manufactures resins, specialty polymers, and solvents that are used in the production of paints and coatings, inks, adhesives, and other formulated products. The Fibers segment offers Estron acetate tow and Estrobond triacetin plasticizers used in cigarette filters; Estron natural and Chromspun solution-dyed acetate yarns for use in apparel, home furnishings, and industrial fabrics; and cellulose acetate flake and acetyl raw materials for acetate fiber producers.
3) W.R. Grace & Co. (GRA)
W.R. Grace & Co. has a Earnings Per Share Growth Rate of 28.19%, a Return on Equity of 222.39%, and a Analysts' Rating of 1.50. The short interest was 2.46% as of 07/22/2012. W.R. Grace & Co. engages in the production and sale of specialty chemicals and materials worldwide. Its Grace Davison segment offers fluid catalytic cracking(FCC) catalysts to produce transportation fuels, such as gasoline and diesel fuels, and other petroleum-based products; FCC additives; hydro processing catalysts used in process reactors to upgrade heavy oils into lighter; silica-based and silica-alumina-based engineered materials used in various industrial and consumer applications, and coatings and print media applications; and packaging materials, such as can and closure sealants, and coatings for cans and closures. This segment also provides polyolefin catalysts and catalyst supports for use in the manufacture of polyethylene and polypropylene resins, and other chemical catalysts and process technologies used in industrial, environmental, and consumer applications; catalysts and adsorbents for the conversion of renewable feed stocks to fuels and chemicals; and chromatography columns, consumables, and instrumentation and reference standards used in pharmaceutical, life science, and related industries.
4) HollyFrontier Corporation (HFC)
|Industry:||Oil & Gas Refining & Marketing|
HollyFrontier Corporation has a Earnings Per Share Growth Rate of 562.57%, a Return on Equity of 39.76%, and a Analysts' Rating of 2.30. The short interest was 2.55% as of 07/22/2012. HollyFrontier Corporation operates as an independent petroleum refiner and marketer in the United States. It produces light products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, liquefied petroleum gas, fuel oil, and specialty and modified asphalt. The company operates refineries in El Dorado, Kansas; Tulsa, Oklahoma; Artesia, New Mexico; Cheyenne, Wyoming; and Woods Cross, Utah.
*Company profiles were sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.