It is exciting when a company starts to gain traction and goes through a period of growth. And it is exciting for investors, as long as those companies are well situated for that growth and don't resort to making hasty decisions that hinder growth. A key area to examine for companies with those strong growth projections is their debt ratios. When a company has minimal debt, it has maintained a sound capital structure and can keep its sights on growth enhancing tactics. With this in mind, we developed a short list of mid cap tech stocks that have projected EPS growth rates above 25% for the coming year and little debt. We think you will find our list worthy of further research.
EPS Growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company, or other credible sources.
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 then looked for companies that have expected Earnings Per Share Growth of more than 25 percent for next year (1-year projected EPS Growth Rate>25%). From here, we then looked for companies that operate with little to no long term debt (Long Term D/E Ratio<.1).
Do you think these mid cap stocks have strong fundamentals? Please use our list to assist with your own analysis.
1) The Ultimate Software Group, Inc. (ULTI)
|Industry||Internet Software & Services|
|1-Year Projected Earnings Per Share Growth Rate||40.20%|
|Long Term Debt/Equity Ratio||0.05|
The Ultimate Software Group, Inc., together with its subsidiaries, designs, develops, and markets unified human capital management software-as-a-service solutions to businesses in the United States and Canada. Its UltiPro software solution offers businesses with cloud-based functionality to manage the employment life cycle from recruitment to retirement. The company was founded in 1990 and is headquartered in Weston, Florida.
2) NetSuite Inc. (N)
|Industry||Business Software & Services|
|1-Year Projected Earnings Per Share Growth Rate||59.09%|
|Long Term Debt/Equity Ratio||0.01|
NetSuite Inc. provides cloud-based financials/enterprise resource planning (ERP) software suites in the United States and internationally. It offers NetSuite, a single platform for financials/ERP, customer relationship management, professional services automation, and e-commerce capabilities that automate processes across departments. The company was founded in 1998 and is headquartered in San Mateo, California.
3) ServiceNow, Inc. (NOW)
|Industry||Information Technology Services|
|1-Year Projected Earnings Per Share Growth Rate||104.20%|
|Long Term Debt/Equity Ratio||0.00|
ServiceNow, Inc. provides enterprise information technology management software-as-a-service for IT. It offers IT service management platform and cloud services; and asset management, business services applications, change management, configuration management database and configuration management system, discovery solutions, field service management, incident and problem management, integration, cost management, IT governance risk and compliance, project and portfolio management, and release management for managed service providers, high tech, financial services, public sector, healthcare and life sciences, and higher education markets. The company was formerly known as Glidesoft, Inc. and changed its name to ServiceNow, Inc. in February, 2006. ServiceNow, Inc. was founded in 2003 and is based in San Diego, California with additional locations in New York, New York; London, United Kingdom, Downers Grove, Illinois; Frankfurt, Germany; and Atlanta, Georgia.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/21/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.