Some investors may skip over large cap stocks because of their perceived growth limitations, but many of these companies have demonstrated that they are industry leaders with no signs of slowing down. To find the large caps stocks that are steady growers, we searched for companies that have two essential traits that sustain a company: high profits and large cash reserves. When a company is strong in both areas, they demonstrate they are highly effective at keeping profit generation as a priority and maintaining liquidity to make strategic acquisitions that foster growth. For your review we have a short list of large cap stocks that are well worth more research.
The operating profit margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the operating profit margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.
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.
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).
We first looked for large cap stocks. We then looked for businesses with strong profit margins (1-year operating margin>15%)(Net Margin [TTM] >10%). We next screened for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any sectors.
Do you think these large-cap stocks have more value to price in? Use our list to help with your own analysis.
1) Southern Copper Corp. (SCCO)
|Operating Profit Margin||53.97%|
Southern Copper Corporation engages in mining, exploring, producing, smelting, and refining copper and other minerals in Peru, Mexico, and Chile. It is involved in the mining, milling, and flotation of copper ore to produce copper and molybdenum concentrates; smelting of copper concentrates to produce anode copper; and refining of anode copper to produce copper cathodes, as well as refined silver. The company operates Toquepala and Cuajone mines in the Andes Mountains located to the southeast of the city of Lima, Peru, as well as a smelter and refinery in the coastal city of Ilo, Peru. It also operates La Caridad and Buenavista copper mines, and smelting and refining plants in Mexico.
In addition, the company operates five underground mines that produce zinc, copper, lead, silver, and gold; a coal mine which produces coal and coke; and a zinc refinery. It has 145,064 hectares of mineral rights in Peru; 176,250 hectares of exploration concessions in Mexico; 1,068 hectares of exploration concessions in Argentina; 35,958 hectares exploration concessions in Chile; and 2,544 hectares of exploration concessions in Ecuador. The company was founded in 1952 and is based in Phoenix, Arizona. Southern Copper Corporation is a subsidiary of Americas Mining Corporation.
2) QUALCOMM Incorporated (QCOM)
|Operating Profit Margin||30.46%|
QUALCOMM Incorporated designs, develops, manufactures, and markets digital telecommunications products and services. It operates in four segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), Qualcomm Wireless and Internet (QWI), and Qualcomm Strategic Initiatives (QSI). The QCT segment develops and supplies integrated circuits and system software based on code division multiple access (CDMA), orthogonal frequency division multiple access (OFDMA), and other technologies for use in voice and data communications, networking, application processing, multimedia, and global positioning systems. The QTL segment grants licenses to use portions of the its intellectual property portfolio, which includes patent rights useful in the manufacture and sale of certain wireless products, such as products implementing cdmaOne, CDMA2000, WCDMA, CDMA TDD (including TD-SCDMA), GSM/GPRS/EDGE, and/or OFDMA standards.
The QWI segment is involved in providing Qualcomm Internet Services, which offers content enablement services for the wireless industry, and push-to-talk and other products and services for wireless network operators; Qualcomm Government Technologies that provides development, hardware, and analytical services to the United States government agencies involving wireless communications technologies; Qualcomm Enterprise Services, which offers satellite and terrestrial-based two-way wireless information and position reporting services to transportation and logistics companies and other enterprise companies with fleet vehicles; and Firethorn that builds and manages software applications to enable mobile commerce services. The QSI segment invests in early-stage companies that support the design and introduction of new products and services, as well as holds spectrum licenses. The company operates primarily in China, South Korea, Taiwan, Japan, and the United States. QUALCOMM Incorporated was founded in 1985 and is headquartered in San Diego, California.
3) Oracle Corporation (ORCL)
|Operating Profit Margin||36.93%|
Oracle Corporation develops, manufactures, markets, hosts, and supports database and middleware software, applications software, and hardware systems. It licenses database and middleware software, including database and database management, application server and cloud application, service-oriented architecture and business process management, business intelligence, identity and access management, data integration, Web experience management, portals, and content management and social network software, as well as development tools and Java, a software development platform; and applications software comprising enterprise resource planning, customer relationship management, financials, governance, risk and compliance, procurement, supply chain management, enterprise portfolio project and enterprise performance management, business intelligence analytic applications, Web commerce, and industry-specific applications software.
The company also provides customers with rights to unspecified software product upgrades and maintenance releases; Internet access to technical content; and Internet and telephone access to technical support personnel. In addition, it offers computer server, storage and networking product, and hardware-related software, such as Oracle Solaris Operating System; Oracle engineered systems; storage products, which comprise tape, disk, and networking solutions for open systems and mainframe server environments; and hardware systems support solutions, including software updates for the software components, as well as product repair, maintenance, and technical support services. Further, the company provides consulting solutions in business and IT strategy alignment, enterprise architecture planning and design, initial product implementation and integration, and ongoing product enhancement and upgrade services; Oracle managed cloud services; and education services. Oracle Corporation was founded in 1977 and is headquartered in Redwood City, California.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/30/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.