As humans, we tend to get fixated on the latest and greatest. We like new and shiny things, and are always upgrading our technology, cars, or investments in search of something better and faster. While innovation keeps things exciting, we can easily overlook opportunities that have true staying power. Along these lines, we ran a scan of large cap stocks. When a company is at this level, they may not appeal as much to our desire for growth, but they can bring solidity and reliability to a portfolio. Especially when the companies have strong profit margins and minimal long term debt. This combination points to companies with savvy management in place, smart business strategies, and is not hindered by paying off debt. We think you will be intrigued by what we found.
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.
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 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.
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.
We first looked for large cap stocks. We next screened for businesses with strong profit margins (1-year operating margin>15%)(1-year fiscal EPS growth rate>10%). Next, we then screened for businesses that operate with little to no long term debt (Long Term D/E Ratio<.1). We then looked for businesses that have maintained a sound capital structure (D/E Ratio<.1). We did not screen out any sectors.
Do you think these large-cap stocks will offer healthy returns? Use our list along with your own analysis.
1) Compania de Minas Buenaventura SA (BVN)
|Operating Profit Margin||37.63%|
|Earnings Per Share Growth Rate||29.98%|
|Long Term Debt/Equity Ratio||0.03|
Compaa de Minas Buenaventura S.A.A., a precious metals company, engages in the exploration, mining, and processing of gold and silver in Peru. It also explores for other metals, including zinc, lead, and copper. Compaa de Minas Buenaventura S.A.A. was founded in 1953 and is headquartered in Lima, Peru.
2) Goldcorp Inc. (GG)
|Operating Profit Margin||36.50%|
|Earnings Per Share Growth Rate||16.82%|
|Long Term Debt/Equity Ratio||0.03|
Goldcorp Inc. engages in the acquisition, development, exploration, and operation of precious metal properties. It primarily explores gold, silver, copper, lead, and zinc. The company's principal mining properties include Red Lake, Porcupine, and Musselwhite gold mines in Canada; Peasquito gold/silver/lead/zinc mine, and Los Filos and El Sauzal gold mines in Mexico; Marlin gold/silver mine in Guatemala; Alumbrera gold/copper mine in Argentina; and Marigold and Wharf gold mines in the United States. Goldcorp Inc. was founded in 1954 and is headquartered in Vancouver, Canada.
3) Chunghwa Telecom Co. Ltd. (CHT)
|Industry||Telecom Services - Domestic|
|Operating Profit Margin||22.70%|
|Earnings Per Share Growth Rate||24.90%|
|Long Term Debt/Equity Ratio||0.00|
Chunghwa Telecom Co., Ltd. provides integrated telecommunication services primarily in Taiwan. It offers domestic fixed communications services, including local and domestic long distance telephone, broadband access, local and domestic long distance leased line, multimedia-on-demand, Wi-Fi, and domestic data services; mobile communications services comprising mobile, paging, information and communication technology, corporate solution, and bill handling services; Internet, data communication, Internet data center, and other Internet services; international fixed communications services that comprise international long distance telephone, international leased line, international data, satellite, and other services, including the provision of interconnection of its fixed line network and mobile network with other operators; and ICT services, such as cloud computing. The company was founded in 1996 and is headquartered in Taipei, Taiwan.
4) Cerner Corporation (CERN)
|Industry||Healthcare Information Services|
|Operating Profit Margin||21.16%|
|Earnings Per Share Growth Rate||26.99%|
|Long Term Debt/Equity Ratio||0.05|
Cerner Corporation designs, develops, markets, installs, hosts, and supports healthcare information technology, healthcare devices, and content solutions for healthcare organizations and consumers worldwide. Cerner Corporation was founded in 1979 and is headquartered in North Kansas City, Missouri.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 10/10/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.