The category of basic materials combined with companies at the mid-cap level is an appealing place to be in the current economy. While investing in more established companies in the basic material sector appears to be more of a defensive investing strategy, there are ways to find growth opportunities. We started by selecting profit generating companies that have EPS growth projections far above 25% for the next five years. These two qualities, profit and strong growth, generally point to companies that have solid management in place that is mindful of streamlining operations to maximize efficiency and growth potential. Take a look at the short list of basic material stocks we gathered below to see if any meet your standards for solid, less risky investment opportunities.
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 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.
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 basic materials stocks. Next, we then screened for businesses that have shown strong bottom line growth over the last year (1-year fiscal EPS growth rate>10%) (1-year operating margin>15%). Next, we then screened for businesses with projected high growth, measured by 5-year projected EPS growth above 25%.
Do you think these mid-cap stocks hold value that has yet to be priced in? Use our list along with your own analysis.
1) Concho Resources, Inc. (CXO)
|Industry||Oil & Gas Drilling & Exploration|
|Earnings Per Share Growth Rate||144.35%|
|Operating Profit Margin||62.22%|
|5-Year Projected Earnings Per Share Growth Rate||51.97%|
Concho Resources Inc., an independent oil and natural gas company, engages in the acquisition, exploration, and development of oil and natural gas properties in the United States. Its principal operating areas are located in the Permian Basin region of southeast New Mexico and west Texas. As of December 31, 2011, the company had estimated proved reserves of 386.5 million barrel of oil equivalent. Concho Resources Inc. has its headquarters in Midland, Texas.
2) Kodiak Oil & Gas Corp. (KOG)
|Industry||Oil & Gas Drilling & Exploration|
|Earnings Per Share Growth Rate||205.75%|
|Operating Profit Margin||33.79%|
|5-Year Projected Earnings Per Share Growth Rate||50.00%|
Kodiak Oil & Gas Corp. engages in the acquisition, exploration, exploitation, development and production of crude oil and natural gas in the United States. The company's oil and natural gas reserves and operations are primarily concentrated in the Williston Basin of North Dakota and Montana, and the Green River Basin of Wyoming and Colorado. As of December 31, 2011, it had estimated proved reserves of 35.6 million barrels of oil and 25.5 billion cubic feet of natural gas. The company was formerly known as Columbia Copper Company Ltd. and changed its name to Kodiak Oil & Gas Corp. in September 2001. Kodiak Oil & Gas Corp. was incorporated in 1972 and its headquarters is in Denver, Colorado.
3) Oasis Petroleum Inc. (OAS)
|Industry||Independent Oil & Gas|
|Earnings Per Share Growth Rate||367.28%|
|Operating Profit Margin||43.27%|
|5-Year Projected Earnings Per Share Growth Rate||26.67%|
Oasis Petroleum Inc., an independent exploration and production company, engages in the acquisition and development of oil and natural gas resources in the Montana and North Dakota regions of the Williston Basin. The company's primary project areas include West Williston, East Nesson and Sanish. As of December 31, 2011, it had approximately 78.7 million barrels of oil equivalent of estimated net proved reserves. Oasis Petroleum Inc. was founded in 2007 and is based in Houston, Texas.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/13/2012.