Large Cap stocks are an attractive option for investors who want to round out their portfolio with companies that are well past the proving ground stage. By being profitable, they demonstrate that they are most likely well managed, fiscally prudent, and have an eye on their competition. Today our focus is on profitable large caps with sizable cash reserves. We came up with a brief synopsis of each company to start your research process.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.
The Current Ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick Ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for large cap stocks. We next screened for businesses that have strong bottom line profitability (Net Margin [TTM]>10%)(1-year operating margin>15%). From here, we then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We did not screen out any sectors.
Do you think these large-cap stocks can offer attractive returns? Use our list along with your own analysis.
1) Amgen Inc. (AMGN)
Amgen Inc. has a Net Margin of 23.50%, an Operating Profit Margin of 28.23%, a Current Ratio of 3.24, and a Quick Ratio of 2.94. The short interest was 1.61% as of July 25, 2012. Amgen Inc., a biotechnology medicines company, discovers, develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses primarily in the United States, Europe, and Canada. Its principal products include Neulasta and NEUPOGEN to stimulate the production of neutrophils, which is type of white blood cell that helps the body fight infections; Enbrel, an inhibitor of tumor necrosis factor that plays a role in the body's response to inflammatory diseases; and Aranesp and EPOGEN erythropoiesis-stimulating agents, which stimulate the production of red blood cells.
The company also markets other products comprising Sensipar/Mimpara, a small molecule calcimimetic that lowers serum calcium levels; Vectibix, a monoclonal antibody that binds specifically to the epidermal growth factor receptor; and Nplate, a thrombopoietin (TPO) receptor agonist that mimics endogenous TPO, the primary driver of platelet production, as well as offers Prolia and XGEVA denosumab, which are human monoclonal antibodies that specifically targets RANKL, an essential regulator of osteoclasts.
2) Celgene Corporation (CELG)
Celgene Corporation has a Net Margin of 29.34%, an Operating Profit Margin of 32.81%, a Current Ratio of 3.71, and a Quick Ratio of 3.51. The short interest was 1.65% as of July 25, 2012. Celgene Corporation, a biopharmaceutical company, discovers, develops, and commercializes various therapies to treat cancer and immune-inflammatory related diseases primarily in the United States and Europe.
The company's commercial stage products include REVLIMID, an oral immunomodulatory drug for the treatment of patients with multiple myeloma and myelodysplastic syndromes (MDS); VIDAZA, a pyrimidine nucleoside analog to treat various subtypes MDS and acute myeloid leukemia; and THALOMID for patients with multiple myeloma, and for the prevention and suppression of the cutaneous manifestation of erythema nodosum leprosum recurrence. It also offers ABRAXANE to treat metastatic breast cancer; and ISTODAX for the treatment of cutaneous and peripheral T-cell lymphoma.
3) Las Vegas Sands Corp. (LVS)
|Industry:||Resorts & Casinos|
Las Vegas Sands Corp. has a Net Margin of 20.85%, an Operating Profit Margin of 25.73%, a Current Ratio of 2.30, and a Quick Ratio of 2.28. The short interest was 3.41% as of July 25, 2012. Las Vegas Sands Corp., together with its subsidiaries, owns, develops, and operates various integrated resort properties primarily in the United States, Macau, and Singapore.
It owns and operates The Venetian Resort Hotel Casino, The Palazzo Resort Hotel Casino, and The Sands Expo and Convention Center in Las Vegas, Nevada; and the Sands Macao casino, The Venetian Macao Resort Hotel, and the Four Seasons Hotel Macao in Macau, the People's Republic of China. The company also owns and operates the Marina Bay Sands, a 55-story hotel towers in Singapore; and the Sands Casino Resort Bethlehem in Bethlehem, Pennsylvania.
4) Check Point Software Technologies Ltd. (CHKP)
|Industry:||Security Software & Services|
Check Point Software Technologies Ltd. has a Net Margin of 54.19%, an Operating Profit Margin of 56.17%, a Current Ratio of 4.18, and a Quick Ratio of 4.18. The short interest was 0.81% as of July 25, 2012. Check Point Software Technologies Ltd. develops, markets, and supports a range of software, and combined hardware and software products and services for information technology (IT) security worldwide.
It offers network and gateway security solutions that enable its customers to implement their security policies on network traffic between internal networks and the Internet, as well as between internal networks and private networks that are shared with partners; endpoint security solutions, which provide various software blades that run on individual computers connected to the network, such as desktop computers, laptop computers, and other mobile devices; and security management solutions to ensure consistent operations in accordance with an enterprise's security policy.
The company also offers technical services comprising technical customer support programs and plans, such as enterprise based support and collaborative enterprise support; certification and educational training on the checkpoint's products; and professional services in implementing, upgrading, and optimizing checkpoint's products, including design planning, security implementation, and project management services.
*Company profiles were sourced from Finviz. Financial data was sourced from Google Finance and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.