When you see mid-cap stocks with ample cash reserves and generating strong profits it is worth taking note. These two attributes work together to point to companies that have strong fiscal management and are well positioned for growth. When profit and liquidity are high, it signals that fiscal oversight is savvy, cautious and has maximized efficiency. With this in mind, we have a list of companies at the mid-cap level that have impressive profits and significant cash reserves. We think you will find these mid-cap stocks deserving of additional research.
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).
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
We first looked for mid-cap stocks. We then looked for companies that have strong liquidity (Current Ratio>2) (Quick Ratio>2). We then looked for businesses with strong profit margins (1-year operating margin>15%) (Net Margin [TTM]>10%). We did not screen out any sectors.
Do you think these mid-cap stocks failed to price their value accurately? Use our screened list as a starting point for your own analysis.
1) Dril-Quip, Inc. (DRQ)
|Industry||Oil & Gas Equipment & Services|
|Operating Profit Margin||22.05%|
Dril-Quip, Inc. designs, manufactures, sells and services engineered offshore drilling and production equipment for use in deepwater, harsh environment, and severe service applications worldwide. The company's principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems and manifolds, mudline hanger systems, specialty connectors and associated pipe, drilling and production riser systems, liner hangers, wellhead connectors, and diverters. Its products are primarily used to explore for oil and gas on offshore drilling rigs; drilling and production of oil and gas wells on offshore platforms; tension leg platforms, which are floating production platforms connected to the ocean floor via vertical mooring tethers; Spars, a floating cylindrical structure; and floating production, storage, and offloading monohull moored vessels.
The company also provides services, including technical advisory services, rework and reconditioning services, and rental of running tools for use in the installation and retrieval of its products. It serves integrated, independent, and foreign national oil and gas companies, as well as offshore drilling contractors, and engineering and construction companies. Dril-Quip, Inc. was founded in 1981 and its headquarters is in Houston, Texas.
2) Xilinx Inc. (XLNX)
|Industry||Semiconductor - Specialized|
|Operating Profit Margin||27.36%|
Xilinx, Inc. designs, develops and markets programmable platforms worldwide. Its programmable platforms include integrated circuits in the form of programmable logic devices (PLDs); software design tools; targeted reference designs; printed circuit boards; and predefined system functions delivered as intellectual property cores. The company's PLDs comprise field programmable gate arrays, complex programmable logic devices, and extensible processing platforms, which perform logic functions. It also provides design services, customer training, field engineering, and technical support. The company offers its products to electronic equipment manufacturers in end markets, such as wired and wireless communications, industrial, scientific and medical, aerospace and defense, audio, video and broadcast, consumer, automotive, and data processing. Xilinx, Inc. sells its products through independent distributors, as well as through a network of independent sales representative firms and a direct sales management organization. The company was founded in 1984 and its headquarters is in San Jose, California.
3) Syntel, Inc. (SYNT)
|Industry||Information Technology Services|
|Operating Profit Margin||26.45%|
Syntel, Inc. provides information technology and knowledge process outsourcing (KPO) services worldwide. It operates in four segments: Applications Outsourcing, KPO, e-Business and TeamSourcing. The Applications Outsourcing segment provides software applications development, maintenance, testing, migration, and infrastructure services. The KPO segment offers a host of outsourced solutions for knowledge and business processes. It focuses on middle and back-office business processes of the transaction cycle in the capital markets, banking, healthcare, and insurance industries. The e-Business segment provides technology services in the areas of architecting, implementing, and maintaining Web solutions, data warehousing/business intelligence, enterprise application integration, business process management, and enterprise resource planning solutions.
The TeamSourcing segment offers professional IT consulting services directly to customers on a staff augmentation basis. Syntel, Inc. provides services to a range of companies primarily in the financial services, healthcare and life sciences, insurance, manufacturing, automotive, retail, logistics, and telecom industries. The company was founded in 1980 and its headquarters is in Troy, Michigan.
4) Microchip Technology Inc. (MCHP)
|Industry||Semiconductor - Specialized|
|Operating Profit Margin||27.63%|
Microchip Technology Incorporated engages in the development, manufacture, and sale of semiconductor products for embedded control applications. The company offers microcontrollers, such as 8-bit, 16-bit, and 32-bit microcontrollers marketed under the PIC brand name, as well as 16-bit dsPIC digital signal controllers (DSC); and development tools that enable system designers to program a PIC microcontroller and dsPIC DSC for specific applications. It also provides analog and interface products, including power management, linear, mixed-signal, thermal management, RF Linear drivers, safety and security, and interface products; and memory products consisting of serial electrically erasable programmable read-only memory, serial flash memories, parallel flash memories, and serial SRAM memories for production of very small footprint devices.
In addition, the company licenses its SuperFlash technology to foundries, integrated device manufacturers, and design partners for use in the manufacture of their advanced microcontroller products, gate array, RF, and analog products that require embedded flash; and provides engineering services. It serves automotive, communications, computing, consumer, and industrial control markets. The company sells its products through direct sales force and distributors worldwide. Microchip Technology Incorporated was founded in 1989 and its headquarters is in Chandler, Arizona.
5) Dolby Laboratories, Inc. (DLB)
|Operating Profit Margin||42.59%|
Dolby Laboratories, Inc. provides products, services and technologies for the entertainment industry worldwide. It designs and manufactures video and audio products for film production, cinema, and television broadcast industries; and provides services to support film production, television broadcast, and music production. The company is involved in licensing technologies in signal processing systems designed to enhance sound quality or enable surround sound in movie soundtracks, DVDs, Blu-ray Discs, personal computers, digital televisions, mobile devices, video games, satellite and cable broadcasts, and online streaming; and developing technologies for mobile devices for 3D, digital cinema, post-production, and LED backlit LCD televisions. It also offers traditional cinema processors, which are used to read, decode, and play back a film's soundtrack and calibrate the sound system in a movie theater; digital cinema products for digital cinema encoding, distribution, and playback; digital 3D products that deliver a 3D image with an existing digital cinema server and white screen; and digital media adapters to adapt analog cinema audio systems to the digital audio technologies.
In addition, Dolby Laboratories provides broadcast products to encode, transmit, and decode multiple channels of audio for DTV and HDTV program production and broadcast distribution; and professional reference monitor, a video monitor used in the production and post-production of cinematic and video content. The company licenses its technologies to media software vendors and manufacturers of home audio and video products, set top boxes, video game consoles, mobile devices, in-car entertainment systems, and personal computers. It sells its products directly to customers, as well as through dealers and distributors. The company was founded in 1965 and is based in San Francisco, California.
6) Allied Nevada Gold Corp. (ANV)
|Operating Profit Margin||40.05%|
Allied Nevada Gold Corp., together with its subsidiaries, engages in the evaluation, acquisition, exploration and advancement of gold exploration and development projects. It principally operates the Hycroft Mine, an open pit heap leach gold and silver mine covering approximately 61,389 acres of mineral rights located in the west of Winnemucca, Nevada. The company is also involved in the exploration and development of various exploration properties, including Hasbrouck, Mountain View, Three Hills, Wildcat, Maverick Springs, and Pony Creek/Elliot Dome projects. In addition, the company holds exploration rights to approximately 100 other exploration properties in Nevada. Allied Nevada Gold Corp. was incorporated in 2006 and its headquarters is in Reno, Nevada.
7) Diamond Offshore Drilling Inc. (DO)
|Industry||Oil & Gas Drilling & Exploration|
|Operating Profit Margin||34.82%|
Diamond Offshore Drilling, Inc. operates as an offshore oil and gas drilling contractor worldwide. It offers a range of services in the ultra-deepwater, deepwater, and mid-water markets, as well as in the non-floater or jack-up market. The company operates a fleet of approximately 49 offshore rigs comprising 32 semisubmersible rigs, 13 jack-up rigs, and 4 drill ships. Its customer base consists primarily of major and independent oil and gas companies, and government-owned oil companies. The company was founded in 1989 and its headquarters is in Houston, Texas. Diamond Offshore Drilling, Inc. is a subsidiary of Loews Corporation.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/13/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.