A quick way to get a handle on a company's profitability is to review EPS growth rates. After all, this indicator is intertwined with stock price fluctuations. With this in mind, we wanted to find tech companies at the mid cap level with demonstrated profitability as shown by a substantial increase in their EPS growth rates over the past year. Tech companies of this size tend to offer greater protection from risk than small caps, which also ups their appeal. Further, the companies included in our list have not leveraged their assets to fund their expansion. We think you will like this list of profitable tech stocks with minimal debt.
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 stock price, 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 their competitors.
The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
We first looked for mid cap technology stocks. We next 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%). From here, we then looked for companies that have maintained a sound capital structure (D/E Ratio<.1). We then looked for companies that have maintained a sound long term capital structure (Long Term D/E Ratio<.1).
Do you think these mid-cap stocks have what it takes to grow? Use our list along with your own analysis.
1) Ansys, Inc. (ANSS)
|Industry||Technical & System Software|
|Earnings Per Share Growth Rate||16.52%|
|Operating Profit Margin||36.92%|
|Long Term Debt/Equity Ratio||0.01|
ANSYS, Inc. develops and markets engineering simulation software and technologies used by engineers, designers, researchers, and students in aerospace, automotive, manufacturing, electronics, biomedical, energy, and defense industries and academia worldwide. Its products include ANSYS Workbench, a framework upon which the company's suite of engineering simulation technologies are built; Multiphysics that creates virtual prototypes of designs; Structural Mechanics, which offers simulation tools for product design and optimization; Fluid Dynamics that provides modeling fluid flow and other related physical phenomena; and Explicit Dynamics, which simulates physical events.
The company also offers Electromagnetics, which provides field simulation software for designing electronic and electromechanical products; System Simulation, a collaborative simulation environment providing modeling scalability for evaluating entire systems, including 3-D high-fidelity models, multibody dynamics, and circuit reduced-order models; and ANSYS Engineering Knowledge Manager, a solution for simulation-based process and data management. In addition, it provides an academic product suite with a portfolio of academic products based on associate, research, and teaching; and a high-performance computing (HPC) product suite delivering cross-physics parallel processing capability for the company's simulation software by supporting structural, fluids, thermal, and electromagnetic simulations in a single HPC solution.
Further, the company offers geometry handling solutions for engineering simulation; meshing technology that transforms a physical model into a mathematical model; and a suite of Apache software, which delivers power analysis and optimization platforms along with integrated methodologies for managing the power budget, power delivery integrity, and power-induced noise in an electronic design. The company was founded in 1970 and is headquartered in Canonsburg, Pennsylvania.
2) SolarWinds, Inc. (SWI)
|Earnings Per Share Growth Rate||36.64%|
|Operating Profit Margin||42.10%|
|Long Term Debt/Equity Ratio||0.00|
SolarWinds, Inc. designs, develops, markets, sells, and supports enterprise information technology infrastructure management software for IT professionals in various organizations in the United States and internationally. The company offers enterprise-class IT management products, including Network Performance Monitor, a server-based fault and performance management platform to minimize network downtime; Network Performance Monitor modules, a series of add-ons; a network configuration manager to automate the processes of network device discovery, network inventory management, and network change management; a user device tracker, a server-based switch port management tool; scalability engines to increase the scale of a number of the products; and an enterprise operations console to provide web-based views of various instances of Network Performance Monitor modules and Application Performance Monitor.
Its enterprise-class network and IT management products also include Application Performance Monitor, a server-based availability and performance management system for applications and server infrastructure; a patch manager to automate the process of deploying, managing, and reporting on patches and configuration settings; and a synthetic end user monitor to capture the user steps of any web application and monitor the end-user experience; a storage manager that combines reporting, monitoring, and notification on the performance of storage resources; a backup profiler to provide a consolidated view of the status of backup operations; a virtualization manager to manage various aspects of virtual server infrastructure; and a log and event manager to automate the collection and interpretation of logs. In addition, the company provides free tools, such as desktop, laptop, server-based, or internet-based applications; and tools and toolsets for specific solutions of routine and complicated tasks. The company was founded in 1999 and is headquartered in Austin, Texas.
3) MICROS Systems, Inc. (MCRS)
|Earnings Per Share Growth Rate||16.50%|
|Operating Profit Margin||20.81%|
|Long Term Debt/Equity Ratio||0.00|
MICROS Systems, Inc. designs, manufactures, markets, and services enterprise information solutions for the hospitality and specialty retail industries. The company's enterprise solutions comprise hotel information systems, restaurant information systems, and specialty retail information systems. The hotel information systems consist primarily of software, encompassing property based management systems; related property-specific modules and applications; and central systems, including central reservation systems.
The restaurant information systems include hardware and software for point-of-sale and operational applications; a suite of back office applications, such as inventory, labor, and financial management; and centrally hosted enterprise applications. The retail information systems comprise hardware and software encompassing POS, loss prevention, Web commerce applications, business analytics, customer gift cards, electronic payments, and enterprise applications. The company also provides system installation, operator and manager training, on-site hardware maintenance, customized software development, application software support, credit card software support, systems configuration, network support, and professional consulting services, as well as software-hosting, Web site development, portal management, and Web-based marketing services.
In addition, it sells hardware devices, such as cash drawers, handheld order entry terminals, and pole displays, as well as hardware products, including personal computers, servers, printers, network cards, and related computer equipment. MICROS Systems, Inc. distributes its products through a direct sales force, dealers, and distributors. It operates in the United States, Canada, Europe, the Pacific Rim, and Latin America. The company was formerly known as Picos Manufacturing, Inc. and changed its name to MICROS Systems, Inc. in 1978. MICROS Systems, Inc. was founded in 1977 and is headquartered in Columbia, Maryland.
4) NetEase, Inc. (NTES)
|Industry||Internet Software & Services|
|Earnings Per Share Growth Rate||44.01%|
|Operating Profit Margin||46.37%|
|Long Term Debt/Equity Ratio||0.00|
NetEase, Inc., through its subsidiaries, engages in online games, Internet portal, and wireless value-added services businesses in China. It operates an online community and offers Chinese language content and services. The company provides its self-developed massively multi-player online role-playing games, including Fantasy Westward Journey, Westward Journey Online II, Tianxia III, Ghost, Heroes of Tang Dynasty, and Westward Journey Online III; and licensed games, such as Blizzard Entertainment's World of Warcraft and StarCraft II. It also offers Internet users Chinese language-based online content channels that focus on news, entertainment, sports, finance, information technology, automobiles, education, and real estate; community and communication services, including micro-blogging, blogging, photo album, instant messaging, online personal advertisements, open courses, news apps, e-reading, matchmaking, clubs, and community forums; a Website directory; and Web pages search services, as well as online video services.
In addition, NetEase, Inc. provides online advertising services on its Websites; wireless value-added services that allow users to receive news and other information, such as stock quotes and emails, download ringtones and logos for their mobile phones, and participate in matchmaking communities and interactive games; and email services, as well as ecommerce related services, such as personalized photo-based products. The company was formerly known as NetEase.com, Inc. and changed its name to NetEase, Inc. in March 2012. NetEase, Inc. was founded in 1997 and is based in Beijing, the People's Republic of China.
5) F5 Networks, Inc. (FFIV)
|Earnings Per Share Growth Rate||58.85%|
|Operating Profit Margin||31.13%|
|Long Term Debt/Equity Ratio||0.00|
F5 Networks, Inc. provides application delivery networking technology that optimizes the delivery of network-based applications, and the security, performance, and availability of servers, data storage devices, and other network resources in the Americas, EMEA, Japan, and the Asia Pacific. The company offers BIG-IP, an application delivery controller; VIPRION, a chassis-based application delivery controller; and FirePass, an appliance that provides SSL VPN access for remote users of Internet protocol networks, and applications connected to the networks from Web browsers on any device.
It also offers Application Security Manager, an application firewall; WebAccelerator, which speeds Web transactions by optimizing individual network object requests, connections, and end-to-end transactions from browser to databases; WAN Optimization Manager, which integrates application delivery with WAN optimization technologies; Access Policy Manager, which provides secure, granular, and context-aware control of access to applications; Edge Gateway, a remote access product, which offers context-aware, policy controlled, and remote access to applications at LAN speed; Enterprise Manager that allows customers to discover and view company's products in a single window; and ARX product family, a series of high performance and enterprise-class intelligent file virtualization devices.
In addition, F5 Networks provides Data Manager, a software product, which interfaces with file storage devices; iControl, an application programming interface that allows customers to control their products in the network; iRules, a programming language embedded in TMOS architecture; and consulting, training, maintenance, and other technical support services. The company sells its products to enterprise customers and service providers through various channels, including distributors, value-added resellers, and systems integrators. F5 Networks, Inc. was founded in 1996 and is headquartered in Seattle, Washington.
6) Informatica Corporation (INFA)
|Industry||Business Software & Services|
|Earnings Per Share Growth Rate||27.17%|
|Operating Profit Margin||20.12%|
|Long Term Debt/Equity Ratio||0.00|
Informatica Corporation provides enterprise data integration and data quality software and services worldwide. The company offers PowerCenter, which integrates data virtually from business systems in various formats and delivers that data throughout the enterprise; PowerExchange, which enables information technology organizations to access the sources of enterprise data without having to develop custom data access programs; and Data Services for finding, integrating, and managing data in the enterprise.
It also provides Data Quality, which delivers data quality to stakeholders, projects, and data domains; Master Data Management, which offers consolidated business-critical data; and B2B Data Exchange software for multi-enterprise data integration. In addition, the company offers Application Information Lifecycle Management products to manage various phases of the data lifecycle; Data Replication, an enterprise software for real-time database data movement and heterogeneous data integration; Complex Event Processing to detect, correlate, analyze, and respond to data-driven events; Ultra Messaging products, which enables ultralow latency messaging, and systems that reduce hardware infrastructure costs; Cloud Data Integration; and Cloud Services that deliver purpose-built data integration cloud applications.
Further, it provides product-related customer support, consulting, and education services. Informatica Corporation serves aerospace, automotive, energy and utilities, entertainment/media, financial services, healthcare/life sciences, high technology, insurance, manufacturing, public sector, retail, services, telecommunications, and travel/transportation industries through its direct sales force, as well as through systems integrators, resellers, distributors, and original equipment manufacturer partners. The company was founded in 1993 and is headquartered in Redwood City, California.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/18/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.