There is a reason why many investors find the mid cap range to be a good fit. Here you do not have as much risk as small cap stocks, and there is still plenty of room for expansion. To find mid caps that are well positioned for growth, it is important that a company not be over leveraged. Debt tends to weigh a company down and reduce flexibility to respond to market demands and opportunities. Today we screened for mid cap stocks that are not debt laden and have EPS growth rates of 25% over the next five years. If stocks with these traits speak to you, then you will like our list below.
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. The five-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.
We first looked for mid cap stocks. Next, we screened for businesses that operate with little to no long term debt (long-term D/E ratio<.1). Then we screened for businesses that have expected earnings per share growth of more than 25 percent for the next five years(five-year projected EPS growth rate>25%). We did not screen out any sectors.
Do you think these mid-cap stocks are worth more than the market currently says? Use our screened list as a starting point for your own analysis.
1) ServiceNow, Inc. (NOW)
|Industry||Information Technology Services|
|Long Term Debt/Equity Ratio||0.00|
|5-Year Projected Earnings Per Share Growth Rate||50.00%|
Service-now.com provides enterprise information technology (IT) management software-as-a-service for IT. It offers IT service management (ITSM) platform and cloud services; and asset management, business services applications, change management, configuration management database and configuration management system, discovery solutions, field service management, incident and problem management, integration, cost management, IT governance risk and compliance, project and portfolio management, and release management for managed service providers, high tech, financial services, public sector, healthcare and life sciences, and higher education markets. The company was formerly known as Glidesoft, Inc. and changed its name to Service-now.com in February 2006. Service-now.com was founded in 2003 and is based in San Diego, California, with additional locations in San Diego, California; New York, New York; London, United Kingdom, Downers Grove, Illinois; Frankfurt, Germany; and Atlanta, Georgia.
2) athenahealth, Inc. (ATHN)
|Long Term Debt/Equity Ratio||0.00|
|5-Year Projected Earnings Per Share Growth Rate||30.33%|
athenahealth, Inc., a business services company, provides ongoing billing, clinical-related, and other related services to medical group practices primarily in the United States. The company provides services through the athenaNet, a proprietary Internet-based practice management application. It offers athenaCollector, a revenue cycle management service that automates and manages billing-related functions for physician practices, and includes a practice management platform. The athenaCollector assists its physician clients with the handling of claims and billing processes to help manage reimbursement.
The company also provides Anodyne Analytics, a business intelligence application, which offers physicians and practice managers with insight into practice performance. In addition, it provides athenaClinicals, an electronic health record service that automates and manages medical-record-management-related functions for practices, as well as assists medical groups with the handling of physician documentation, orders, and related inbound and outbound communications. Further, the company offers athenaCommunicator that allows practices to manage patient communication tasks electronically, including the use of automated reminder calls; the creation of a self-service patient portal for registration, appointment requests, bill payments, and general communication; automatic generation of emails to patients; and patient education tools.
Additionally, it provides athenaCoordinator, a referral cycle management tool that helps streamline the disorganized system of patient care coordination. athenahealth, Inc. sells its products through a direct sales force, as well as through channel partners. The company was formerly known as athenahealth.com, Inc. and changed its name to athenahealth, Inc. in November 2000. athenahealth, Inc. was incorporated in 1997 and is headquartered in Watertown, Massachusetts.
3) The Ultimate Software Group, Inc. (ULTI)
|Industry||Internet Software & Services|
|Long Term Debt/Equity Ratio||0.05|
|5-Year Projected Earnings Per Share Growth Rate||25.43%|
The Ultimate Software Group, Inc., together with its subsidiaries, designs, develops, and markets unified human capital management software-as-a-service solutions to businesses in the United States and Canada. Its UltiPro software solution offers businesses with cloud-based functionality to manage the employment life cycle from recruitment to retirement. The UltiPro solution includes feature sets for talent acquisition and onboarding, human resource management and compliance, benefits management and online enrollment, payroll, performance management, salary planning and budgeting for compensation management, succession management, reporting and analytical decision-making tools, and time and attendance, as well as role-based access for executives, managers, administrators, and employees.
The company offers its products and services for various industries, including manufacturing, food services, sports, technology, finance, insurance, retail, real estate, transportation, communications, healthcare, and other services. It also provides implementation, training, maintenance, and technical support services. The Ultimate Software Group, Inc. markets its products under the UltiPro Enterprise and UltiPro Workplace brand names through its direct sales teams. The company was founded in 1990 and is headquartered in Weston, Florida.
4) MercadoLibre, Inc. (MELI)
|Long Term Debt/Equity Ratio||0.00|
|5-Year Projected Earnings Per Share Growth Rate||28.28%|
MercadoLibre, Inc., together with its subsidiaries, hosts online commerce and payments platforms in Latin America. Its services are designed to provide its users with mechanisms to buy, sell, pay for, and collect on e-commerce transactions. The company principally offers MercadoLibre marketplace, an automated online commerce service, which permits businesses and individuals to list items and conduct their sales and purchases online in a fixed-price or auction-based format. Its MercadoLibre marketplace enables registered users to list and purchase motor vehicles, vessels, aircraft, real estate, and other services through online classified listings; and Internet users to browse through various products and services that are listed on its Website and to register with MercadoLibre to list, bid for, and purchase items and services.
The company also provides MercadoPago, an integrated online payments solution to facilitate transactions on and off the MercadoLibre marketplace by providing a mechanism that allows its users to send and receive payments online. In addition, it offers MercadoClics advertising program that allows businesses to promote their products and services on the Internet. This program enables users and advertisers to place, display, and/or text advertisements on its Web pages to promote their brands and offerings. Further, the company provides MercadoShops on-line stores solution, a software-as-a-service, which allows users to set-up, manage, and promote their own on-line Webstores.
As of December 31, 2010, the company operated online commerce platforms directed towards Argentina, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Mexico, Panama, Peru, Uruguay, and Venezuela; online payments solutions directed towards Argentina, Brazil, Mexico, Venezuela, Chile, and Colombia; and a real estate classified platform that covers various areas in Florida. The company was founded in 1999 and is headquartered in Buenos Aires, Argentina.
5) NetSuite Inc. (N)
|Industry||Business Software & Services|
|Long Term Debt/Equity Ratio||0.01|
|5-Year Projected Earnings Per Share Growth Rate||31.99%|
NetSuite Inc. provides cloud-based financials/enterprise resource planning (ERP) software suites in the United States and internationally. It offers NetSuite, a single platform for financials/ERP, customer relationship management (CRM), professional services automation (PSA), and e-commerce capabilities that automate processes across departments. The company also provides NetSuite OneWorld, which offers the ability to manage various companies or legal entities, with different currencies, taxation rules, and reporting requirements, within a single NetSuite account; NetSuite CRM+ that includes sales force automation, marketing automation, customer support, and service management functionality; and NetSuite OpenAir, a PSA solution that is used by professional services organizations and is targeted to companies with thousands of employees, and provides a view into the services organization's performance and profitability with dashboards and reports.
In addition, it provides add-on modules; NetSuite industry editions; and SuiteCloud Platform that allows customers, partners, and developers to tailor and extend its suite to meet specific company, vertical, and industry requirements for personalization, business processes, and best practices. The company sells its products directly through professionals to medium-sized businesses and divisions of companies; and indirectly through its relationships with channel partners. It serves companies operating in various industries, including distribution and wholesale; professional, consulting, and other services; computer software; e-commerce and retail; manufacturing; computer and information technology services; telecommunications services; financial services; healthcare services; and education. The company was founded in 1998 and is headquartered in San Mateo, California.
*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.