When large-cap companies are profitable and have a significant cash reserve, it is often a sign that bigger and better things are on the horizon. These companies are well positioned for realizing expansion strategies. Today, we hone in on large caps from a variety of sectors that fit this profile. If you are interested in companies of this nature, the list below is a great place to start your research.
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.
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 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 with strong profit margins (1-year operating margin >15%) (1-year fiscal EPS Growth Rate >10%). We next screened for businesses with a large amount of cash on hand (Current Ratio >2)(Quick Ratio >2). We did not screen out any sectors.
Do you think these large-cap stocks will perform well? Use our list along with your own analysis.
1) Celgene Corporation (NASDAQ:CELG)
Celgene Corporation has an Operating Profit Margin of 32.81%, an Earnings Per Share Growth Rate of 51.89%, a Current Ratio of 3.71, and a Quick Ratio of 3.51. The short interest was 1.63% as of 07/31/2012. 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.
2) Chemical & Mining Co. of Chile Inc. (NYSE:SQM)
|Industry:||Chemicals - Major Diversified|
Chemical & Mining Co. of Chile Inc. (Sociedad Qumica y Minera de Chile S.A.) has an Operating Profit Margin of 35.87%, an Earnings Per Share Growth Rate of 42.82%, a Current Ratio of 3.23, and a Quick Ratio of 2.00. The short interest was 0.47% as of 07/31/2012. Chemical and Mining Company of Chile Inc. engages in the production and sale of fertilizers and specialty chemicals in Chile and internationally. The company's specialty plant nutrients include potassium nitrate, sodium nitrate, sodium potassium nitrate, and specialty blends for crops, such as vegetables, fruits, flowers, potatoes, and cotton, as well as Ultrasol for application via fertigation; Qrop for field application; Speedfol for foliar application; Allganic for organic farming; and Nutrilake for aquaculture. It also produces iodine and iodine derivatives, which are used in a range of medical, pharmaceutical, agricultural, and industrial applications, including X-ray contrast media, polarizing films for liquid crystal displays (LCDs), antiseptics, biocides, and disinfectants; and in the synthesis of pharmaceuticals, herbicides, electronics, pigments, dye components, and heat stabilizers. In addition, the company provides lithium carbonate for use in various applications comprising batteries, frits for the ceramic and enamel industries, heat-resistant glass, primary aluminum, lithium bromine for use in air conditioner equipment, and continuous casting powder for steel extrusion, pharmaceuticals, and lithium derivatives; and lithium hydroxide, which is used as a raw material in the lubricating grease industry.
3) Yamana Gold, Inc. (NYSE:AUY)
Yamana Gold, Inc. has an Operating Profit Margin of 38.79%, an Earnings Per Share Growth Rate of 19.74%, a Current Ratio of 2.82, and a Quick Ratio of 2.45. The short interest was 0.62% as of 07/31/2012. Yamana Gold Inc. engages in the exploration, development, and production of mineral properties, primarily gold. It also explores for copper, molybdenum, zinc, and silver metals. The company's property portfolio includes seven operating gold mines, including Chapada mine, Jacobina mining complex, and Fazenda Brasileiro mine in Brazil; El Pen mine and Minera Florida mine in Chile; Gualcamayo mine in Argentina; and Mercedes mine in Mexico.
4) Oracle Corporation (NYSE:ORCL)
Oracle Corporation has an Operating Profit Margin of 36.93%, an Earnings Per Share Growth Rate of 17.53%, a Current Ratio of 2.60, and a Quick Ratio of 2.59. The short interest was 1.03% as of 07/31/2012. Oracle Corporation develops, manufactures, markets, hosts, and supports database and middleware software, applications software, and hardware systems. It licenses database and middleware software, including database and database management, application server and cloud application, service-oriented architecture and business process management, business intelligence, identity and access management, data integration, Web experience management, portals, and content management and social network software, as well as development tools and Java, a software development platform; and applications software comprising enterprise resource planning, customer relationship management, financials, governance, risk and compliance, procurement, supply chain management, enterprise portfolio project and enterprise performance management, business intelligence analytic applications, Web commerce, and industry-specific applications software. The company also provides customers with rights to unspecified software product upgrades and maintenance releases; Internet access to technical content; and Internet and telephone access to technical support personnel.
5) ARM Holdings plc (NASDAQ:ARMH)
|Industry:||Semiconductor - Specialized|
ARM Holdings plc has an Operating Profit Margin of 35.68%, an Earnings Per Share Growth Rate of 28.75%, a Current Ratio of 2.87, and a Quick Ratio of 2.85. The short interest was 1.50% as of 07/31/2012. ARM Holdings plc designs reduced instruction set computing (RISC) microprocessors, physical intellectual property, and related technology and software. Its products and services include 16/32-bit RISC microprocessors cores, data engines, graphics intellectual property, and on-chip fabric intellectual property; embedded software; physical intellectual property; development tools; and consulting, support, and maintenance services. The company licenses and sells its technology and products to electronics companies, which in turn manufacture, market, and sell microprocessors, application-specific integrated circuits, and application-specific standard processors to systems companies for incorporation into various end products.
6) Intuitive Surgical, Inc. (NASDAQ:ISRG)
|Industry:||Medical Appliances & Equipment|
Intuitive Surgical, Inc. has an Operating Profit Margin of 40.35%, an Earnings Per Share Growth Rate of 30.00%, a Current Ratio of 4.91, and a Quick Ratio of 4.57. The short interest was 3.77% as of 07/31/2012. Intuitive Surgical, Inc. designs, manufactures, and markets da Vinci surgical systems for various surgical procedures, including urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Its da Vinci surgical system consists of a surgeon's console or consoles, a patient-side cart, a 3-D vision system, Firefly fluorescence imaging product, da Vinci skills simulator, and proprietary wristed' instruments. The company's da Vinci surgical system translates the surgeon's natural hand movements on instrument controls at the console into corresponding micro-movements of instruments positioned inside the patient through small puncture incisions, or ports.
7) Goldcorp Inc. (NYSE:GG)
Goldcorp Inc. has an Operating Profit Margin of 38.89%, an Earnings Per Share Growth Rate of 16.82%, a Current Ratio of 3.12, and a Quick Ratio of 2.50. The short interest was 0.75% as of 07/31/2012. Goldcorp Inc. engages in the acquisition, development, exploration, and operation of precious metal properties. It primarily explores gold, silver, copper, lead, and zinc. The company's principal mining properties include Red Lake, Porcupine, and Musselwhite gold mines in Canada; Peasquito gold/silver/lead/zinc mine, and Los Filos and El Sauzal gold mines in Mexico; Marlin gold/silver mine in Guatemala; Alumbrera gold/copper mine in Argentina; and Marigold and Wharf gold mines in the United States.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.