Too much debt creates a heavy, sinking feeling. When a company is operating with little to no debt, management is not bogged down with developing strategies for getting in the clear. Instead, they can focus on profit and growth. This was the mind frame behind our scan for mid cap basic materials stocks today. All of the companies in our list have strong profits and little or no debt. We think you will be intrigued by what we found.
The debt/equity ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
The long-term debt/equity ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
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 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.
We first looked for mid cap basic materials stocks. Next, we screened for businesses that operate with little to no debt (D/E Ratio<.1). Then we looked for companies that have maintained a sound long term capital structure (Long Term D/E Ratio<.1). We then looked for businesses that have posted strong earnings growth for shareholders over an extended period of time (1-year fiscal EPS growth rate>10%)(Net Margin [TTM]>10%).
Do you think these mid-cap stocks have a positive future in store? Use our list to help with your own analysis.
1) Titanium Metals Corporation (TIE)
|Industry||Industrial Metals & Minerals|
|Long Term Debt/Equity Ratio||0.08|
|Earnings Per Share Growth Rate||43.09%|
Titanium Metals Corporation produces and sells titanium melted and mill products. It provides titanium sponge, which is the basic form of titanium metal used in titanium products; melted products, such as ingots, electrodes, and slabs that are the result of melting titanium sponge and titanium scrap; mill products, which are forged and rolled from ingot or slab, including billets, bars, plates, sheets, strips, and pipes; and fabrications, such as spools, pipe fittings, manifolds, and vessels, as well as offers titanium scrap and titanium tetrachloride. The company serves commercial aerospace and military sectors; and desalination, chemical, oil and gas, consumer, sporting goods, healthcare, automotive, and power generation industries. Titanium Metals Corporation distributes its products through its sales force in the United States and Europe; and through independent agents and distributors internationally. The company was founded in 1950 and is headquartered in Dallas, Texas.
2) Eldorado Gold Corp. (NYSE:EGO)
|Long Term Debt/Equity Ratio||0.01|
|Earnings Per Share Growth Rate||42.68%|
Eldorado Gold Corporation, together with its subsidiaries, engages in the exploration, development, mining, and production of gold properties in Brazil, China, Greece, and Turkey. It operates the Kişladağ and Efemukuru gold mines in Turkey; the Jinfeng, Tanjianshan, and White Mountain gold mines in China; and the Vila Nova iron ore mine in Brazil. As of December 31, 2011, Eldorado Gold Corporation had approximately 19 million ounces of proven and probable gold reserves. The company was formerly known as Eldorado Corporation Ltd. and changed its name to Eldorado Gold Corporation in April 1996. Eldorado Gold Corporation was founded in 1992 and is headquartered in Vancouver, Canada.
3) Pan American Silver Corp. (NASDAQ:PAAS)
|Long Term Debt/Equity Ratio||0.02|
|Earnings Per Share Growth Rate||2487.25%|
Pan American Silver Corp. engages in the exploration, acquisition, development, and operation of silver properties. The company also focuses on copper, zinc, lead, and gold minerals. It has mining operations in Mexico, Peru, Argentina, and Bolivia; and has non-producing silver resources in the United States and Argentina. The company owns and operates the Quiruvilca mine, the Huaron mine, and the Morococha mine in Peru; La Colorada Mine and Alamo Dorado Mine in Mexico; Manantial Espejo Project in Argentina; and San Vicente in Bolivia. Pan American Silver Corp. was founded in 1979 and is headquartered in Vancouver, Canada.
4) Compania de Minas Buenaventura SA (NYSE:BVN)
|Long Term Debt/Equity Ratio||0.03|
|Earnings Per Share Growth Rate||29.98%|
Compaa de Minas Buenaventura S.A.A., a precious metals company, engages in the exploration, mining, and processing of gold and silver in Peru. It also explores for other metals, including zinc, lead, and copper. The company operates the Orcopampa mine located in the province of Castilla, department of Arequipa; the Poracota underground mine located in the province of Condesuyos, department of Arequipa; the Uchucchacua mine located in the province of Oyon, department of Lima; the Julcani underground mine located in the province of Angaraes, department of Huancavelica; and the Recuperada mine located in the province of Huancavelica, department of Huancavelica.
It also operates the Antapite underground mine located in the province of Huaytar, department of Huancavelica; the Shila and Paula underground mines located in the province of Castilla in the department of Arequipa; the Ishihuinca mine located in the province of Caravel, department of Arequipa; the Ishihuinca mine located in the province of Caravel, department of Arequipa; the La Zanja mine located in the district of Pulan in the province of Santa Cruz; and the Colquijirca and Marcapunta Norte mines located east of the city of Lima. In addition, the company provides electrical transmission and generation services; and geological, engineering, design, and construction consulting services to the mining sector. Further, it holds non-controlling interests in other mining companies. Compaa de Minas Buenaventura S.A.A. was founded in 1953 and is headquartered in Lima, Peru.
5) Oceaneering International, Inc. (NYSE:OII)
|Industry||Oil & Gas Equipment & Services|
|Long Term Debt/Equity Ratio||0.08|
|Earnings Per Share Growth Rate||18.51%|
Oceaneering International, Inc., together with its subsidiaries, provides engineered services and products primarily to the offshore oil and gas industry with a focus on deepwater applications worldwide. Its Remotely Operated Vehicles (ROVs) segment provides submersible vehicles operated from the surface to support offshore oil and gas exploration, production, and construction activities. As of March 31, 2012, this segment had a total of 270 ROVs.
The company's Subsea Products segment constructs various built-to-order specialty subsea hardware, including subsea umbilicals utilizing thermoplastic hoses and steel tubes; ROV tooling and work packages; production control equipment; installation and workover control systems; clamp connectors; pipeline connectors and repair systems; subsea tooling; subsea and topside control valves; subsea chemical injection valves; and blowout preventer control systems.
Its Subsea Projects segment provides multiservice vessels, oilfield diving, and support vessel operations, which are used primarily in inspection, repair, maintenance, and installation activities, as well as a mobile offshore production system. This segment also operates and maintains offshore and onshore oil and gas production facilities; provides subsea engineering services; and operates an offshore logistics supply base in Australia. The company's Asset Integrity segment offers asset integrity management and assessment, and nondestructive testing and inspection services. Its Advanced Technologies segment provides project management, engineering services, and equipment for applications in non-oilfield markets. Oceaneering International, Inc. also serves defense and aerospace industries. The company was founded in 1965 and is headquartered in Houston, Texas.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on August 23, 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.