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This list is meant to serve as a starting point for investors. A lot of data has been provided so it should be relatively easy for an investor to scroll down the list and decide if the stock warrants further attention. If you find the stock interesting, you can dig deeper and see if meets with your investment criteria. To help the novice investor we have put out this guideline which could prove to be useful in the selection process. "Our suggested guidelines when searching for new investment ideas. These are not absolute rules but simple suggestions to help the novice investor get started. Remember there are always exceptions to the rules. Among the 5 stocks we are going to examine today, one stock falls under the "speculative category". The company in question is Zynga Inc (ZNGA). Only individuals willing to take on extra risk should consider this play.

A lot of key ratios will be used in this article and it would be good for investors to get a handle on some of the more important key ratios listed below.

Current Ratio is obtained by dividing the current assets by current liabilities. This ratio allows you to see if the company can pay its current debts without potentially jeopardizing future earnings. Ideally the company should have a ratio of 1 or higher.

Price to free cash flow is obtained by dividing the share price by free cash flow per share. Higher ratios are associated with more expensive companies and vice versa. Lower ratios are generally more attractive. If a company generated $400 million in cash flow and then spent $100 million on capital expenditure, then its free cash flow is $300 million. If the share price is $100 and the free cash flow per share is $5, then the company trades at 20 times-free cash flow. This ratio is also useful because it can be used as a comparison to the average within the industry. This gives you an idea of how the company you are interested in holds up to the other companies within the industry.

Cash ratio is the ratio of the company's total cash and cash equivalents to its current liabilities; this ratio is used as a measure of a company's liquidity. It allows investors to determine how fast the company would be able to pay its short term debts if push came to shove. Higher numbers are better because it makes it easier for a company to ask for new loans, increase in credit lines, etc.

Interest coverage is usually calculated by dividing the earnings before interest and taxes for a period of one year by the interest expenses for the same time period. This ratio informs you of a company's ability to make its interest payments on its outstanding debt. Lower interest coverage ratios indicate that there is a larger debt burden on the company and vice versa. For example if a company has an interest ratio of 11.8, this means that it covers interest expenses 11.8 times with operating profits.

Price to tangible book is obtained by dividing share price by tangible book value per share. The ratio gives investors some idea of whether they are paying too much for what would be left over if the company were to declare bankruptcy immediately. In general stocks that trade at higher price to tangible book value could leave investors facing a great percentage per share loss than those that trade at lower ratios. The price to tangible book value is theoretically the lowest possible price the stock would trade to.

Retention ratio is the amount of net income that is not paid out as dividends. In other words, it is the money the company retains that can be used to grow the business, etc. It is calculated by subtracting 1 from the dividend ratio.

Levered free cash flow is the amount of cash available to stock holders after interest payments on debt are made. A company with a small amount of debt will only have to spend a modest amount of money on interest payments, which in turn means that there is more money to send to shareholders in the form of dividends and vice versa

The payout ratio tells us what portion of the profit is being returned to investors. A payout ratio over 100% indicates that the company is paying out more money to shareholders than they are making. This situation cannot last forever. In general if the company has a high operating cash flow and access to capital markets, they can keep this going on for a while. As companies usually only pay the portion of the debt that is coming due and not the whole debt, this technique/trick can technically be employed to maintain the dividend for some time. If the payout ratio continues to increase, the situation warrants close monitoring as this cannot last forever. If your tolerance for risk is low, look for similar companies with the same or higher yields, but with lower payout ratios.

Long-term debt-to-equity ratio is the total long term debt divided by the total equity. The amount of long-term debt a company carries on its balance sheet is very important for it indicates the amount of money a company owes that it doesn't expect to pay off in the next year. A balance sheet that illustrates that long term debt has been decreasing for a few years is a sign that the company is doing well. When debt levels fall, and cash levels increase, the balance sheet is said to be improving and vice versa. If a company has too much debt on its books, it could end up being overwhelmed with interest payments and risk having too little working capital which could in the worst case scenario lead to bankruptcy.

Operating cash flow is generally a better metric than earnings per share because a company can show positive net earnings and still not be able to properly service its debt. The cash flow is what pays the bills.

Free cash flow yield is obtained by dividing free cash flow per share by the current price of each share. Generally lower ratios are associated with an unattractive investment and vice versa. Free cash flow takes into account capital expenditures and other ongoing costs associated with the day to day to functions of the business. In our view free cash flow yield is a better valuation metric then earnings yield because of the above factors.

Company: Cabot Oil & Gas (COG)


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Brief overview

  1. 5 year sales growth rate = 5.63%
  2. EPS vs 1 year ago = -34%
  3. Sales vs 1 year ago = 16%
  4. Long term debt to equity = 0.46
  5. Gross margins = 72%
  6. Beta = 0.8
  7. Quarterly revenue growth rate = 10.4%
  8. Profit margins = 10.22%
  9. Short percentage of float = 4.3%
  10. 52 week change = 39%
  11. Levered free cash flow = - 373M
  12. Operating cash flow = 572M

Growth

  1. Net Income ($mil) 12/2011 = 122
  2. Net Income ($mil) 12/2010 = 103
  3. Net Income ($mil) 12/2009 = 148
  4. Net Income Reported Quarterly ($mil) = 36
  5. EBITDA ($mil) 12/2011 = 654
  6. EBITDA ($mil) 12/2010 = 597
  7. EBITDA ($mil) 12/2009 = 537
  8. Cash Flow ($/share) 12/2011 = 2.21
  9. Cash Flow ($/share) 12/2010 = 2.08
  10. Cash Flow ($/share) 12/2009 = 2.01
  11. Sales ($mil) 12/2011 = 980
  12. Sales ($mil) 12/2010 = 844
  13. Sales ($mil) 12/2009 = 879
  14. Annual EPS before NRI 12/2007 = 0.84
  15. Annual EPS before NRI 12/2008 = 1.05
  16. Annual EPS before NRI 12/2009 = 0.78
  17. Annual EPS before NRI 12/2010 = 0.49
  18. Annual EPS before NRI 12/2011 = 0.55


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Dividend history

  1. Dividend Yield = 0.2
  2. Dividend Yield 5 Year Average = 0.4
  3. Dividend 5 year Growth = 3.24

Dividend sustainability

  1. Payout Ratio = 0.12
  2. Payout Ratio 5 Year Average = 0.09

Performance

  1. 5 Year History EPS Growth = -13.73
  2. ROE 5 Year Average = 10.22
  3. Return on Investment = 3.94
  4. Debt/Total Cap 5 Year Average = 30.08
  5. Current Ratio 12/2011 = 1.05
  6. Current Ratio 5 Year Average = 1.02
  7. Quick Ratio = 0.95
  8. Cash Ratio = 0.61
  9. Interest Coverage Quarterly = 2.76
  10. Retention rate = 88%

Company: Antares Pharma (ATRS)


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Brief overview

  1. 5 year sales growth rate = 21.87%
  2. 5 year capital spending growth rate = 10.18%
  3. Long term debt to equity = 0.00
  4. Quarterly revenue growth rate = 92%
  5. Profit margins = -15%
  6. Short percentage of float = 12.4%
  7. 52 week change = 157%
  8. Levered free cash flow = - 951K
  9. Operating cash flow = - 1.7M
  10. Sales vs 1 year ago = 28%

Growth

  1. Net Income ($mil) 12/2011 = -4
  2. Net Income ($mil) 12/2010 = -6
  3. Net Income ($mil) 12/2009 = -10
  4. EBITDA ($mil) 12/2011 = -4
  5. EBITDA ($mil) 12/2010 = -6
  6. EBITDA ($mil) 12/2009 = -9
  7. Cash Flow ($/share) 12/2011 = -0.04
  8. Cash Flow ($/share) 12/2010 = -0.07
  9. Cash Flow ($/share) 12/2009 = -0.12
  10. Sales ($mil) 12/2011 = 16
  11. Sales ($mil) 12/2010 = 13
  12. Sales ($mil) 12/2009 = 8
  13. Annual EPS before NRI 12/2007 = -0.14
  14. Annual EPS before NRI 12/2008 = -0.19
  15. Annual EPS before NRI 12/2009 = -0.14
  16. Annual EPS before NRI 12/2010 = -0.07
  17. Annual EPS before NRI 12/2011 = -0.05


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Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 72.88
  2. EPS Growth Quarterly(1)/Q(-3) = 1-100.00
  3. ROE 5 Year Average 12/2011 = -95.38
  4. Return on Investment 06/2011 = -16.85
  5. Debt/Total Cap 5 Year Average 12/2011 = 11.35
  1. Current Ratio 06/2011 = 3.63
  2. Current Ratio 5 Year Average = 2.98
  3. Quick Ratio = 3.54
  4. Cash Ratio = 3.28

Notes

While this stock has performed very well. It's not a play for the risk averse. Biotech plays are generally very volatile in nature and only those willing to take on some risk should consider this play. A test of the 3.75-4.00 ranges would be a good point to consider opening up new positions. The pattern is still very bullish and the stock could potentially trade as 7.00 in the near future.

Company: Marathon Oil Corp (MRO)

Brief Overview

  1. 52 week change = 14.33%
  2. Profit Margin = 11.8%
  3. Operating Margin = 30.9%
  4. Quarterly Revenue Growth = 1.4%
  5. Quarterly Earnings Growth = - 60%
  6. Beta = 1.4
  7. Percentage Held by Institutions = 1.7%
  8. Short Percentage of Float = 1.2%

Growth

  1. Net Income ($mil) 12/2011 = 2946
  2. Net Income ($mil) 12/2010 = 2568
  3. Net Income ($mil) 12/2009 = 1463
  4. Net Income Reported Quarterly ($mil) = 417
  5. EBITDA ($mil) 12/2011 = 6800
  6. EBITDA ($mil) 12/2010 = 6188
  7. EBITDA ($mil) 12/2009 = 4819
  8. Cash Flow ($/share) 12/2011 = 6.48
  9. Cash Flow ($/share) 12/2010 = 6.56
  10. Cash Flow ($/share) 12/2009 = 4.37
  11. Sales ($mil) 12/2011 = 15282
  12. Sales ($mil) 12/2010 = 73621
  13. Sales ($mil) 12/2009 = 54139
  14. Annual EPS before NRI 12/2007 = 5.43
  15. Annual EPS before NRI 12/2008 = 6.47
  16. Annual EPS before NRI 12/2009 = 1.63
  17. Annual EPS before NRI 12/2010 = 3.65
  18. Annual EPS before NRI 12/2011 = 3.21


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Dividend history

  1. Dividend Yield = 2.5
  2. Dividend Yield 5 Year Average = 3.3
  3. Dividend 5 year Growth = -0.83

Dividend sustainability

  1. Payout Ratio 03/2012 = 0.22
  2. Payout Ratio 5 Year Average = 0.26

Performance


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  1. Next 3-5 Year Estimate EPS Growth rate = 2.06
  2. ROE 5 Year Average = 15.63
  3. Current Ratio = 0.70
  4. Current Ratio 5 Year Average = 1.19
  5. Quick Ratio = 0.65
  6. Cash Ratio = 0.21
  7. Interest Coverage = 35
  8. Retention rate = 78%
  9. Sales vs 1 year ago = - 79%
  10. 5 year sales growth rate = - 22%
  11. EPS 5 year growth rate = -16%

Notes

If you are bullish on the stock consider opening positions in the 22.50-23.50 ranges and place a stop at 19.00. A weekly close below 19.00 will indicate that it is going to put in a new series of 52 week lows before a base is in place. Also if filled consider taking profits in the 32-34 ranges.

Company: Costco Whole Cp (COST)

Brief Overview

  1. Levered Free Cash Flow = 1.30B
  2. 5 year sales growth rate= 7.49%
  3. 5 year EPS growth rate = 7.29%
  4. Relative Strength 52 weeks = 81
  5. Cash Flow 5-year Average = 4.33
  6. Capital Spending rate =- 4.03%
  7. Quarterly Revenue Growth = 8.2%
  8. Quarterly Earnings Growth = 19.1%
  9. Operating Cash Flow = 3.27B
  10. Beta = 0.49
  11. Percentage Held by Institutions = 78.1%

Growth

  1. Net Income ($mil) 12/2011 = 1462
  2. Net Income ($mil) 12/2010 = 1303
  3. Net Income ($mil) 12/2009 = 1086
  4. Net Income Reported Quarterly ($mil) = 386
  5. EBITDA ($mil) 12/2011 = 3354
  6. EBITDA ($mil) 12/2010 = 2960
  7. EBITDA ($mil) 12/2009 = 2563
  8. Cash Flow ($/share) 12/2011 = 5.29
  9. Cash Flow ($/share) 12/2010 = 4.81
  10. Cash Flow ($/share) 12/2009 = 4.25
  11. Sales ($mil) 12/2011 = 88915
  12. Sales ($mil) 12/2010 = 77946
  13. Sales ($mil) 12/2009 = 71422
  14. Annual EPS before NRI 12/2007 = 2.63
  15. Annual EPS before NRI 12/2008 = 2.91
  16. Annual EPS before NRI 12/2009 = 2.54
  17. Annual EPS before NRI 12/2010 = 2.95
  18. Annual EPS before NRI 12/2011 = 3.3


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Dividend history

  1. Dividend Yield = 1.10
  2. Dividend Yield 5 Year Average = 1.2
  3. Dividend 5 year Growth = 12.28

Dividend sustainability

  1. Payout Ratio = 0.3
  2. Payout Ratio 5 Year Average 03/2012 = 0.26

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 12.85
  2. 5 Year History EPS Growth 03/2012 = 5.99
  3. ROE 5 Year Average 03/2012 = 12.86
  4. Current Ratio 03/2012 = 1.18
  5. Current Ratio 5 Year Average = 1.12
  6. Quick Ratio = 0.59
  7. Cash Ratio = 0.51
  8. Interest Coverage Quarterly = 33.74
  9. Retention rate= 70%

Company: Zynga Inc (ZNGA)

Brief Overview

  1. Percentage Held by Insiders = 23.48
  2. Number of Institutional Sellers 12 Weeks = 1
  3. Percentage held by institutions = 59%
  4. 7. Profit Margin = -41.57%
  5. 8. Operating Margin = - 45%
  6. 9. Quarterly Revenue Growth = 19%
  7. Operating Cash Flow = 353M
  8. Percentage Held by Institutions = 59%
  9. Short Percentage of Float = 21.7%
  10. Levered Free Cash Flow = 81.7M

Growth

  1. Net Income ($mil) 12/2011 = -404
  2. Net Income ($mil) 12/2010 = 28
  3. Net Income ($mil) 12/2009 = -53
  4. Net Income Reported Quarterly ($mil) = - 22.8
  5. EBITDA ($mil) 12/2011 = N/A
  6. EBITDA ($mil) 12/2010 = 167
  7. EBITDA ($mil) 12/2009 = -42
  8. Cash Flow ($/share) 12/2011 = N/A
  9. Cash Flow ($/share) 12/2010 = 0.58
  10. Cash Flow ($/share) 12/2009 = N/A
  11. Sales ($mil) 12/2011 = 1140
  12. Sales ($mil) 12/2010 = 597
  13. Sales ($mil) 12/2009 = 121
  14. Annual EPS before NRI 12/2007 = N/A
  15. Annual EPS before NRI 12/2008 = N/A
  16. Annual EPS before NRI 12/2009 = N/A
  17. Annual EPS before NRI 12/2010 = 0.38
  18. Annual EPS before NRI 12/2011 = 0.24


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Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 22.92
  2. Current Ratio = 2.19
  3. Current Ratio 5 Year Average = 1.91
  4. Quick Ratio = 3.03
  5. Cash Ratio = 2.82
  6. Interest Coverage Quarterly = N/A

Suggested strategy

Levered free cash flow decreased from $102 million in the first quarter to $81.7 million in the second quarter. Net income improved from -$85 million in the 1st quarter to -$22.8 million in the second quarter. This play would fall under the "speculative category". The percentage short of float is almost 22%, which makes this a very good play for a short squeeze. As it has taken such a beating it could experience a nice relief rally, but only players willing to take on extra risk should consider this play. This stock is the most speculative out of all the stocks covered in this article.

Conclusion

In general, the markets are rather overbought and are due for a stronger correction. They have been trending higher and higher on lower volume. This is usually not a good long-term development. Long-term investors should consider waiting for a much stronger pullback before aggressively committing money to this market.

EPS, company vs industry 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. Earnings estimates sourced from dailyfinance.com.

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: A Broad Range Of Dividend And Growth Plays To Reflect On