Investing in companies at the mid-cap level appeals to those who like to take a broad and longer-term approach to diversifying their investment portfolio. Especially when those companies are pulling in profits and appear to have strong and steady growth. These characteristics can add up to solid, less risky investment opportunities. With this in mind, we ran a general scan of mid-cap sized companies to find those with EPS growth rates above 25% for the next five years. In addition, they have strong profits, signaling that there are fiscal controls in place to keep a watchful eye on the bottom line. Take a look at the list of mid-cap stocks below to find some new and familiar names that may appeal to you.
Return on Assets [ROA] illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
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
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.
We first looked for mid-cap stocks. From here, we then looked for companies that have strong profitability relative to their asset base (ROA [TTM]>10%) (Net Margin [TTM]>10%). From here, 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 did not screen out any sectors.
Do you think these mid-cap stocks will go up in valuation? Please use our list to assist with your own analysis.
1) Qihoo 360 Technology Co. Ltd (QIHU)
|Industry||Internet Service Providers|
|Return on Assets||11.59%|
|5-Year Projected Earnings Per Share Growth Rate||52.12%|
Qihoo 360 Technology Co. Ltd. provides Internet and mobile security products in the People's Republic of China. Its principal products include 360 Safe Guard, an Internet security product for Internet security and system optimization; 360 Anti-Virus, an anti-virus application to protect users' computers against trojan horses, viruses, worms, adware, and other forms of malware; and 360 Mobile Safe, a security program for the Google Android, Apple iOS, and Nokia Symbian smartphone operating systems. The company's platform products are 360 Safe Browser, a Web browser; 360 Personal Start-up Page, a default homepage of 360 Safe Browser and a key access point to popular and preferred information and applications; 360 Application Store, a key access point to securely obtain and manage software and applications; and 360 Safebox, a solution that protects users against thefts of personal account information.
It also provides online advertising services, including online marketing services and search referral services; and Internet value-added services including the operation of Web games developed by third parties, remote technical support, and cloud-based services. Qihoo 360 Technology Co. Ltd. has strategic partnership with China Network Television. The company was formerly known as Qihoo Technology Company Limited and changed its name to Qihoo 360 Technology Co. Ltd. in December 2010. Qihoo 360 Technology Co. was founded in 2005 and is based in Beijing, the People's Republic of China.
2) SIRIUS XM Radio Inc. (SIRI)
|Industry||Broadcasting - Radio|
|Return on Assets||40.59%|
|5-Year Projected Earnings Per Share Growth Rate||25.20%|
Sirius XM Radio Inc. provides satellite radio services in the United States and Canada. The company broadcasts approximately 135 channels, including music, sports, entertainment, comedy, talk, news, traffic, and weather channels on subscription fee basis through two satellite radio systems. It also offers music genres, such as rock, pop, and hip-hop, as well as dance, jazz, Latin, and classical music; advertising on non-music channels; and applications to allow consumers to access Internet services on mobile devices. In addition, the company sells satellite radios, components and accessories; designs, establishes specifications, sources or specifies parts and components, and manages various aspects of the logistics and production of satellite and Internet radios; and licenses its technology to various electronics manufacturers to develop, manufacture, and distribute radios under various brands.
Further, it provides music services for commercial establishments; satellite television services; Backseat TV, a service offering television content designed primarily for children in the backseat of vehicles; Travel Link, a suite of data services that include graphical weather, fuel prices, sports schedules and scores, and movie listings; and real-time traffic and weather services. The company's satellite radios are primarily distributed through automakers, retailers, and through its Website. As of December 31, 2011, it had 21,892,824 subscribers. The company was formerly known as Sirius Satellite Radio Inc. and changed its name to Sirius XM Radio Inc. in August 2008. Sirius XM Radio Inc. was founded in 1990 and its headquartered is in New York, New York.
3) IPG Photonics Corporation (IPGP)
|Industry||Semiconductor - Integrated Circuits|
|Return on Assets||20.09%|
|5-Year Projected Earnings Per Share Growth Rate||25.74%|
IPG Photonics Corporation develops and manufactures fiber lasers, fiber amplifiers, and diode lasers. Its laser products include low, medium and high output power lasers from 0.5 to 2 microns in wavelength; fiber pigtailed packaged diodes and fiber coupled direct diode laser systems; high-energy pulsed lasers, multi-wavelength and tunable lasers, and single-polarization and single-frequency lasers; solid-state lasers; laser diode chips and packaged laser diodes operating at 9XX nanometers; and high power optical fiber delivery cables, fiber couplers, beam switches, chillers, and accessories. The company also offers amplifier products as well as integrated laser systems, including welding seam stepper and picker, and laser marking and welding systems.
In addition, the company designs and manufactures dense wavelength division multiplexing (DWDM) transport systems; a range of fiber amplifiers; and Raman pump lasers, which enable data transmission in broadband access and DWDM optical networks, as well as sells commercial fiber and diode lasers for use in medical laser systems. It markets its products to original equipment manufacturers, system integrators, and end users through direct sales force, as well as through agreements with independent sales representatives and distributors worldwide. IPG Photonics Corporation was founded in 1990 and its headquarters is in Oxford, Massachusetts.
4) Questcor Pharmaceuticals, Inc. (QCOR)
|Return on Assets||71.38%|
|5-Year Projected Earnings Per Share Growth Rate||35.83%|
Questcor Pharmaceuticals, Inc., a biopharmaceutical company, provides prescription drugs for the treatment of multiple sclerosis, nephrotic syndrome, and infantile spasms indications. It primarily offers H.P. Acthar Gel, an injectable drug for the treatment of acute exacerbations of multiple sclerosis in adults; to induce a diuresis or a remission of proteinuria in the nephrotic syndrome without uremia of the idiopathic type or that due to lupus erythematosus; and as monotherapy for the treatment of infantile spasms in infants and children under two years of age. The company's H.P. Acthar Gel also focuses on rheumatology-related conditions, including collagen diseases and rheumatic disorders. In addition, it offers Doral for the treatment of insomnia. The company sells its Acthar primarily to specialty pharmacies; and Doral to pharmaceutical wholesalers. Questcor Pharmaceuticals, Inc. was founded in 1990 and its headquarters is in Anaheim, California.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/12/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.