Investing in mid cap stocks tends to be a great fit for investors who prefer to dial down the risk associated with lesser established companies. Because of their size, mid caps still have plenty of room to grow. Today, we looked for profit making companies that still have sizeable cash reserves. These two traits point to a company that has solid operations and financial management in place. The liquidity is there for back up if the market fluctuates or if the right opportunity to accelerate growth comes along. Take a look at our list of profitable mid cap stocks that have cash in the bank to see if any spark your interest.
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
Return on Equity [ROE] is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be under-performing.
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.
We first looked for mid cap stocks. We then looked for companies that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). Next, we then screened for businesses that have been able to maintain a sound level of profitability for shareholders (ROE [TTM]>30%)(1-year fiscal EPS growth rate>10%). We did not screen out any sectors.
Do you think these mid-cap stocks have strong enough fundamentals to move higher? Please use our list to assist with your own analysis.
1) W.R. Grace & Co. (GRA)
|Return on Equity||141.00%|
|Earnings Per Share Growth Rate||28.19%|
W.R. Grace & Co. engages in the production and sale of specialty chemicals and materials worldwide. Its Grace Davison segment offers fluid catalytic cracking (FCC) catalysts to produce transportation fuels, such as gasoline and diesel fuels, and other petroleum-based products; FCC additives; hydro processing catalysts used in process reactors to upgrade heavy oils into lighter; silica-based and silica-alumina-based engineered materials used in various industrial and consumer applications, and coatings and print media applications; and packaging materials, such as can and closure sealants, and coatings for cans and closures. This segment also provides polyolefin catalysts and catalyst supports for use in the manufacture of polyethylene and polypropylene resins, and other chemical catalysts and process technologies used in industrial, environmental, and consumer applications; catalysts and adsorbents for the conversion of renewable feed stocks to fuels and chemicals; and chromatography columns, consumables, and instrumentation and reference standards used in pharmaceutical, life science, and related industries. It serves oil refiners; plastics and chemical manufacturers; rigid food and beverage packaging producers; coatings and consumer product manufacturers; and pharmaceutical companies. The company's Grace Construction Products segment produces and sells specialty construction chemicals and materials, including concrete admixtures and fibers; additives used in cement processing; building materials used in commercial and residential construction, and renovation to protect buildings from water, vapor, and air penetration; and fire protection materials used to retard the spread of fire in buildings. W.R. Grace & Co. was founded in 1854 and is headquartered in Columbia, Maryland. On April 2, 2001, W.R. Grace & Co. filed a voluntary petition for reorganization under Chapter 11 in the United States Bankruptcy Court for the District of Delaware.
2) Graco Inc. (GGG)
|Return on Equity||37.24%|
|Earnings Per Share Growth Rate||37.12%|
Graco Inc. designs, manufactures, and markets systems and equipment to pump, meter, mix, and dispense various fluids and semi-solids worldwide. It operates in three segments: Industrial, Contractor, and Lubrication. The Industrial segment provides equipment to apply paint and other coatings to motor vehicles, appliances, furniture, and other industrial and consumer products; and process pump equipment that move and dispense chemicals, and liquid and semi-solid foods. This segment also offers sprayer systems and plural component proportioning equipment to apply protective coatings and foam to various surfaces; and equipment to pump, meter, mix, and dispense sealants, adhesives, molded polyurethane parts, and composites. The Contractor segment provides airless paint and texture sprayers; and accessories, such as spray guns, hoses and filters, and spare parts that include tips and seals to the painters in the construction and maintenance industries, tradesmen, and do-it-yourselfers. The Lubrication segment supplies pumps, hose reels, meters, valves, and accessories to the motor vehicle lubrication industry. It also offers systems, components, and accessories for the automatic lubrication of industrial and commercial equipment, compressors, turbines, and on-road and off-road vehicles. This segment also offers products that automatically lubricate bearings, gears, and generators; and products that evacuate and dispense oil, grease, anti-freeze, and hydraulic fluids from wind power components. It serves various markets, including gas transmission and petrochemical, pulp and paper, mining and construction, agricultural equipment, food and beverage, material handling, metal manufacturing, and wind energy. The company offers its products primarily through third-party distributors. Graco Inc. was founded in 1926 and is headquartered in Minneapolis, Minnesota.
3) TransDigm Group Incorporated (TDG)
|Industry||Aerospace/Defense Products & Services|
|Return on Equity||32.70%|
|Earnings Per Share Growth Rate||11.37%|
TransDigm Group Incorporated designs, produces, and supplies engineered aircraft components for use on commercial and military aircraft principally in the United States. The company's products include mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, pumps and valves, power conditioning devices, AC/DC electric motors and generators, NiCad batteries and chargers, engineered latching and locking devices, rods and locking devices, engineered connectors and elastomers, cockpit security components and systems, cockpit displays, aircraft audio systems, lavatory components, engineered interior surfaces, and lighting and control technology. Its customers comprise distributors of aerospace components; commercial airlines, including national and regional airlines; commercial transport and regional and business aircraft original equipment manufacturers (OEMs); various armed forces of the United States and foreign governments; defense OEMs; system suppliers; and various other industrial customers. TransDigm Group Incorporated was founded in 1993 and is based in Cleveland, Ohio.
4) Waters Corp. (WAT)
|Industry||Medical Appliances & Equipment|
|Return on Equity||34.14%|
|Earnings Per Share Growth Rate||15.54%|
Waters Corporation, an analytical instrument manufacturer, designs, manufactures, sells, and services high performance liquid chromatography, ultra performance liquid chromatography, and mass spectrometry technology systems and support products primarily in the United States, Europe, Japan, and Asia. Its products are used in various industries to detect, identify, monitor, and measure the chemical, physical, and biological composition of materials, as well as to purify a range of compounds; and in drug discovery and development, including clinical trial testing, the analysis of proteins in disease processes, food safety analysis, and environmental testing. The company also offers thermal analysis, rheometry, and calorimetry instruments that are used in predicting the suitability of fine chemicals, polymers, and viscous liquids for various industrial, consumer goods, and healthcare products, as well as for life science research. In addition, it develops and supplies software-based products that interface with its instruments. The company provides its products for pharmaceutical, life science, biochemical, industrial, food, environmental, academic and government customers working in research and development, quality assurance, and other laboratory applications. Waters Corporation was founded in 1958 and is based in Milford, Massachusetts.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/27/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.