For investors interested in growth opportunities, but prefer more established companies, the mid-cap space is ripe with potential. When viewing these stocks, it is key to find the ones that are well positioned for growth. Helpful indicators that signify a company is set for expansion are strong profits and analyst ratings. All of the companies listed today rank well in returns and have a recent analyst recommendation of 'Buy' or 'Strong Buy'. We think you will find this list worthy of further research.
Return on Assets [ROA] illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
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.
We first looked for mid cap stocks. We then screened for businesses that have strong profitability relative to their asset base (ROA [TTM]>10%)(1-year operating margin>15%). From here, we then looked for companies that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We did not screen out any sectors.
Do you think these mid-cap stocks will continue to see such strong profitability? Use our screened list as a starting point for your own analysis.
1) Alliance Resource Partners LP (ARLP)
|Industry:||Industrial Metals & Minerals|
Alliance Resource Partners LP has a Return on Assets of 22.74%, a Operating Profit Margin of 21.52%, and a Analysts' Rating of 2.00. The short interest was 1.55% as of 08/01/2012. Alliance Resource Partners, L.P. engages in the production and marketing of coal primarily to utilities and industrial users in the United States.
2) Yandex N.V. (YNDX)
|Industry:||Internet Information Providers|
Yandex N.V. has a Return on Assets of 26.06%, a Operating Profit Margin of 33.26%, and a Analysts' Rating of 2.00. The short interest was 3.21% as of 08/01/2012. Yandex N.V., an Internet and technology company, operates an Internet search engine in Russia and internationally. It offers access to a range of information available online; localized homepages for specific geographic markets; and personalized and email services. The company also provides specialized search services comprising news aggregation and information services; and price comparison services, such as product information, price comparisons, and consumer-generated reviews of products and online retailers, as well as other specialized search services, including search services for images, videos, music, theatres, televisions, weather, jobs, transportation, cars, and real estate.
3) Syntel, Inc. (SYNT)
|Industry:||Information Technology Services|
Syntel, Inc. has a Return on Assets of 24.74%, a Operating Profit Margin of 26.45%, and a Analysts' Rating of 2.00. The short interest was 4.87% as of 08/01/2012. Syntel, Inc. provides information technology (IT) and knowledge process outsourcing (KPO) services worldwide. It operates in four segments: Applications Outsourcing, KPO, e-Business, and TeamSourcing. The Applications Outsourcing segment provides software applications development, maintenance, testing, migration, and infrastructure services.
4) NetEase.com, Inc. (NTES)
|Industry:||Internet Software & Services|
NetEase.com, Inc. has a Return on Assets of 23.52%, a Operating Profit Margin of 46.49%, and a Analysts' Rating of 2.10. The short interest was 1.42% as of 08/01/2012. NetEase, Inc., through its subsidiaries, engages in online games, Internet portal, and wireless value-added services businesses in China. It operates an online community and offers Chinese language content and services. The company provides its self-developed massively multi-player online role-playing games, including Fantasy Westward Journey, Westward Journey Online II, Tianxia III, Ghost, Heroes of Tang Dynasty, and Westward Journey Online III; and licensed games, such as Blizzard Entertainment's World of Warcraft and StarCraft II. It also offers Internet users with Chinese language-based online content channels that focus on news, entertainment, sports, finance, information technology, automobiles, education, and real estate; community and communication services, including micro-blogging, blogging, photo album, instant messaging, online personal advertisements, open courses, news apps, e-reading, matchmaking, clubs, and community forums; a Website directory; and Web pages search services, as well as online video services.
*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.