When you are looking for growth opportunities, but are concerned about risk, stocks in the mid cap range can fit the bill. Especially when you search specifically for companies that appeared poised for growth based upon their EPS projections. These companies plan to grow significantly in the next year, and because of their mid-cap status, they already have demonstrated their ability to build capacity. Today we have a list of companies of this nature that also appear to be trading below perceived market value. We think you will find our list rather interesting.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 5-Year Expected EPS Growth Rate is a long term annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
The Price/Sales ratio is a price-multiple valuation metric used to help identify if a firm is cheap by its twelve month trailing sales numbers. In the most basic terms, it lets an investor know how much the investment community is willing to pay for every dollar's worth of sales. A firm with a P/S ratio of one or lower would be viewed as cheap because investors are paying $1 or less for every dollar's worth of a firm's sales. On the other hand, a firm is generally considered to be expensive when the P/S ratio is above three. To be clear, these are general guidelines used by the investment community, not hard rules. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share
The forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the forecasted earnings instead. While this number might not be as accurate because it uses "forecasted" numbers, it does offer the benefit of illustrating analysts' expectations of a firm. If the market believes that earnings will grow moving forward, then the forward P/E should be lower than the current P/E. Financial Leverage, also known as the Equity Multiplier, illustrates how a firm is financing its assets. The lower the number, the more a firm is financing its assets internally through stockholder equity. The higher this metric is, the more the firm is relying on debt to finance its assets.
We first looked for mid cap stocks. We then looked for companies that have expected earnings per share growth of more than 25 percent for the next five years(5-year projected EPS Growth Rate>25%). We then looked for companies that are trading at a discount (P/S<1)(forward P/E<10). We did not screen out any sectors.
Do you think these mid-cap stocks will break through to new highs? Use this list as a starting-off point for your own analysis.
1) Harman International Industries Inc. (HAR)
Harman International Industries Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 31.00%, a Price/Sales Ratio of 0.73, and a Forward Price/Earnings Ratio of 9.51. The short interest was 6.05% as of 08/16/2012. Harman International Industries, Incorporated engages in the development, manufacture, and marketing of audio products and electronic systems primarily in the United States, Germany, and other parts of Europe. Its Automotive segment offers audio, electronic, and infotainment systems for vehicle applications to be installed primarily as original equipment by automotive manufacturers under the JBL, Infinity, Mark Levinson, Harman/Kardon, Logic 7, Lexicon, and Becker brand names. This segment also develops, manufactures, sells, and services audio systems under the Bowers & Wilkins brand name; and produces Harman/Kardon branded infotainment systems for Harley-Davidson touring motorcycles. The company's Consumer segment provides a range of audio and consumer electronics for home, multimedia, and mobile applications under the AKG, Harman/Kardon, Infinity, JBL, Mark Levinson, and Selenium brand names.
2) Methanex Corp. (MEOH)
Methanex Corp. has a 5-Year Projected Earnings Per Share Growth Rate of 46.00%, a Price/Sales Ratio of 0.98, and a Forward Price/Earnings Ratio of 8.98. The short interest was 0.72% as of 08/16/2012. Methanex Corporation, together with its subsidiaries, engages in the production, marketing, and sale of methanol. The company also purchases and re-sells methanol produced by others. Its methanol is a clear liquid commodity chemical that is used to produce traditional chemical derivatives, including formaldehyde, acetic acid, and various other chemicals. The company's methanol is also used in energy-related applications -- for blending into gasoline, as a feedstock in the production of dimethyl ether, which can be blended with liquefied petroleum gas for use in household cooking and heating, and in the production of biodiesel; and used to produce methyl tertiary-butyl ether, a gasoline component, as well as used into olefins applications.
3) Goodyear Tire & Rubber Co. (GT)
Goodyear Tire & Rubber Co. has a 5-Year Projected Earnings Per Share Growth Rate of 27.95%, a Price/Sales Ratio of 0.13, and a Forward Price/Earnings Ratio of 4.71. The short interest was 4.18% as of 08/16/2012. The Goodyear Tire & Rubber Company develops, manufactures, distributes, and sells tires, and related products and services worldwide. The company offers various lines of rubber tires for automobiles, trucks, buses, aircraft, motorcycles, farm implements, earthmoving and mining equipment, industrial equipment, and various other applications. It sells tires under the Goodyear, Dunlop, Kelly, Debica, Sava, Fulda, and various other Goodyear owned house brands, as well as under the private-label brands. The company is also involved in retreading truck, aviation, and off-the-road tires; manufacturing and selling tread rubber and other tire retreading materials; providing automotive repair services, and miscellaneous other products and services; and manufacturing and selling flaps for truck tires and other tires.
4) Delta Air Lines Inc. (DAL)
Delta Air Lines Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 38.25%, a Price/Sales Ratio of 0.51, and a Forward Price/Earnings Ratio of 3.26. The short interest was 1.30% as of 08/16/2012. Delta Air Lines, Inc. provides scheduled air transportation for passengers and cargo in the United States and internationally. The company operates at airports in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Paris-Charles de Gaulle, Salt Lake City, and Tokyo-Narita.
5) Weatherford International Ltd. (WFT)
|:Industry||& Oil Gas & EquipmentServices|
Weatherford International Ltd. has a 5-Year Projected Earnings Per Share Growth Rate of 45.00%, a Price/Sales Ratio of 0.67, and a Forward Price/Earnings Ratio of 8.05. The short interest was 2.13% as of 08/16/2012. Weatherford International Ltd. provides equipment and services used in the drilling, evaluation, completion, production, and intervention of oil and natural gas wells worldwide. It offers artificial lift systems, which include reciprocating rod lift systems, progressing cavity pumps, gas lift systems, hydraulic lift systems, plunger lift systems, hybrid lift systems, wellhead systems, and multiphase metering systems. The company also provides drilling services, including directional drilling, Secure Drilling services, well testing, drilling-with-casing and drilling-with-liner systems, and surface logging systems; and well construction services, such as tubular running services, cementing products, liner systems, swellable products, solid tubular expandable technologies, and inflatable products and accessories.
*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.