The common ingredient among successful businesses tends to be money. A stockpile of cash allows companies to be innovative and strategic. Instead of coming from a place of reaction, cash reserves can buy a company time to overcome challenges or take advantage of new trends and technology. For our scan today, we thought it would be interesting to look at companies at the mid cap level with high levels of liquidity and strong projected EPS growth rates for the next five years. These traits add up to companies that appear well positioned for a steady rate of expansion. Review the short list of mid cap stocks below to see if any of these companies meets your standards.
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.
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 mid cap stocks. 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 then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We did not screen out any sectors.
Do you think these mid-cap stocks failed to price their value accurately? Use this list as a starting point for your own analysis.
1) Catamaran Corporation (CTRX)
|5-Year Projected Earnings Per Share Growth Rate||26.51%|
Catamaran Corporation provides pharmacy benefit management services and healthcare information technology solutions to the healthcare benefits management industry in North America. The company offers informedRx, a suite of PBM services; and RxCLAIM, an online transaction processing system to provide online adjudication of third-party prescription drug claims at the point of service, such as claims management and review, as well as payment and billing support and real-time functionality for updating benefit, price, member, provider, and drug details. It also provides Integrail Pathfinder, a software application that enables users to understand the impact of healthcare resource allocation and medical decision-making; IntegrailRx, which measures and predicts both pharmacy and total risk using pharmacy claims; RxBUILDER, a Web-based interface for formulary creation and maintenance; RxPORTAL, which allows customers to interact with a patient's formulary and drug history; RxAUTH, a prior authorization (PA) management solution for automating PA process; and RxTRACK, a data warehouse and analysis system.
In addition, the company offers RxMAX, a rebate management system designed to assist health plans in managing their relationships with pharmaceutical manufacturers; and Zynchros, which provides a suite of formulary management tools to help payers manage their formulary programs and to maintain Medicare Part D compliance in their programs. It serves various organizations in the pharmaceutical supply chain, such as pharmacy benefit managers, managed care organizations, retail pharmacy chains, self-insured employer groups, unions, third party health care plan administrators, and state and federal government entities. The company was formerly known as SXC Health Solutions Corp., and changed its name to Catamaran Corporation in July 2012. Catamaran Corporation was founded in 1993 and is headquartered in Lisle, Illinois.
2) Mellanox Technologies, Ltd. (MLNX)
|Industry||Semiconductor - Broad Line|
|5-Year Projected Earnings Per Share Growth Rate||54.58%|
Mellanox technologies, Ltd., a fabless semiconductor company, produces and supplies interconnect products for computing, storage, and communication applications in the computing, Web 2.0, storage, financial services, database, and cloud markets. It offers semiconductor interconnect products that facilitate data transmission between servers, storage systems, communications infrastructure equipment, and other embedded systems. The company provides solutions based on InfiniBand, including adapters, switch and gateway integrated circuits, adapter cards, switch and gateway systems, cables, and software. Its products also support the Ethernet standard. The company offers adapters to server, storage, communications infrastructure, and embedded systems original equipment manufacturers as ICs or standard card form factors with PCI-X or PCI express interfaces; and switch ICs to server, storage, communications infrastructure, and embedded systems OEMs to create switching equipment.
In addition, it supports server operating systems, including Linux, Windows, AIX, HPUX, Solaris, and VxWorks. Mellanox technologies, Ltd. markets its products under the Mellanox, BridgeX, ConnectX, CORE-Direct, InfiniBridge, InfiniHost, InfiniScale, PhyX, SwitchX, Virtual Protocol Interconnect, and Voltaire trademarks. The company sells its products through a direct sales force, a network of domestic and international sales representatives, and independent distributors in the United States, China, Israel, Europe, and other parts of North America and Asia. Mellanox Technologies, Ltd. was incorporated in 1999 and is headquartered in Yokneam, Israel.
3) Lululemon Athletica Inc. (LULU)
|Industry||Textile - Apparel Clothing|
|5-Year Projected Earnings Per Share Growth Rate||28.46%|
Lululemon athletica inc., together with its subsidiaries, designs, manufactures, and distributes athletic apparel for women, men, and female youth. The company's line of apparel and accessories include fitness pants, shorts, tops, and jackets for healthy lifestyle activities, such as yoga, running, and general fitness. Its fitness-related accessories comprise bags, socks, underwear, yoga mats, instructional yoga DVDs, and water bottles. The company sells its products through a chain of corporate-owned and franchise stores; direct to consumer through e-commerce; and a network of wholesale channels, such as yoga studios, health clubs, and fitness centers. As of January 29, 2012, it had 47 stores in Canada, 108 stores in the United States, 18 stores in Australia, and 1 store in New Zealand under the lululemon athletica and ivivva athletica brand names. Lululemon athletica inc. was founded in 1998 and is based in Vancouver, Canada.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/19/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.