We all know that companies of any size can hit a road block that can hamper profits and growth. That is why cash reserves are essential. Those funds can be used during leaner as well as visionary times. With that in mind, today we focused on the mid-cap sector to find companies that have built up a sizable cash reserve. These companies are well prepared for any future volatility and opportunities. Further, the companies included in our list today have demonstrated an increase in profits over the past year. Based upon their size, earnings and liquidity, these companies have attributes that point to solid offerings. Take a look at our list of profitable mid-cap stocks that have money in the bank to begin your own analysis.
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.
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 shown strong bottom line growth over the last year (1-year fiscal EPS growth rate>10%)(1-year operating margin>15%). We then screened for businesses with a large amount of cash on hand (Current Ratio>2) (Quick Ratio>2). We did not screen out any sectors.
Do you think these mid-cap stocks will go up in valuation? Use our list to help with your own analysis.
1) Salix Pharmaceuticals Ltd. (SLXP)
|Industry||Drugs - Generic|
|Earnings Per Share Growth Rate||405.37%|
|Operating Profit Margin||22.29%|
Salix Pharmaceuticals, Ltd. acquires, develops, and markets prescription drugs and medical devices used in the treatment of various gastrointestinal diseases in the United States. The company was founded in 1989 and its headquarters is in Raleigh, North Carolina.
2) Graco Inc. (GGG)
|Earnings Per Share Growth Rate||37.12%|
|Operating Profit Margin||22.71%|
Graco Inc. designs, manufactures, and markets systems and equipment to pump, meter, mix, and dispense various fluids and semi-solids worldwide. It operates in three segments: Industrial, Contractor, and Lubrication. It serves various markets, including gas transmission and petrochemical, pulp and paper, mining and construction, agricultural equipment, food and beverage, material handling, metal manufacturing, and wind energy. The company offers its products primarily through third-party distributors. Graco Inc. was founded in 1926 and its headquarters is in Minneapolis, Minnesota.
3) Kosmos Energy Ltd (KOS)
|Industry||Independent Oil & Gas|
|Earnings Per Share Growth Rate||99.32%|
|Operating Profit Margin||20.65%|
Kosmos Energy Ltd. engages in the exploration and production of oil and gas in Africa and South America. Its asset portfolio includes production, discovery, and exploration prospects offshore Ghana, as well as exploration licenses with hydrocarbon potential offshore Morocco and Suriname, and onshore Cameroon. The company was founded in 2003 and is based in Hamilton, Bermuda.
4) United Therapeutics Corporation (UTHR)
|Industry||Drug Manufacturers - Other|
|Earnings Per Share Growth Rate||95.75%|
|Operating Profit Margin||45.82%|
United Therapeutics Corporation, a biotechnology company, engages in the development and commercialization of therapeutic products for patients with chronic and life-threatening diseases in the United States and internationally. The company serves pharmaceutical wholesalers through specialty pharmaceutical distributors and other distributors. United Therapeutics Corporation was founded in 1996 and its headquarters is in Silver Spring, Maryland.
5) Helix Energy Solutions Group, Inc. (HLX)
|Industry||Oil & Gas Equipment & Services|
|Earnings Per Share Growth Rate||199.96%|
|Operating Profit Margin||20.68%|
Helix Energy Solutions Group, Inc., together with its subsidiaries, operates as an offshore energy company. It provides reservoir development solutions and other contracting services to the energy market, as well as to its oil and gas properties. The company was formerly known as Cal Dive International, Inc. and changed its name to Helix Energy Solutions Group, Inc. in March 2006. Helix Energy Solutions Group, Inc. was incorporated in 1979 and its headquarters is in Houston, Texas.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/24/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.