When our finances are out of balance, it can create a feeling of overwhelm and stress. We may lean too heavily upon our credit cards to bridge the gap between earnings and bills. Companies are the same. When profits are feeble, they tend to grab onto debt as a life preserver. If the debt is not managed wisely, it places a company in a higher risk category that tends to repel investors. For our list today, we focused on traits that point to companies that exemplify balance: strong earnings and low debt. We specifically looked for companies in the mid cap range as they tend to be provide increased protection as well as growth potential. See the summaries below to review the list of mid cap stocks that we uncovered.
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 Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
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.
We first looked for mid cap stocks. We next screened for businesses that operate with little to no debt (D/E Ratio<.1). We then screened for businesses that have been able to retain strong profit margins on the bottom line (Net Margin [TTM]>10%)(1-year fiscal EPS growth rate>10%). We did not screen out any sectors.
Do you think these mid-cap stocks are at too low of valuations, given their fundamentals? Please use our list to assist with your own analysis.
1) Ansys, Inc. (ANSS)
|Industry||Technical & System Software|
|Earnings Per Share Growth Rate||16.52%|
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. The company was founded in 1970 and is headquartered in Canonsburg, Pennsylvania.
2) Altisource Portfolio Solutions S.A. (ASPS)
|Earnings Per Share Growth Rate||47.55%|
Altisource Portfolio Solutions S.A., together with its subsidiaries, provides services related to real estate and mortgage portfolio management, asset recovery, and customer relationship management primarily in the United States. Altisource Portfolio Solutions S.A. was incorporated in 1999 and is based in Luxembourg.
3) First Republic Bank (FRC)
|Industry||Money Center Banks|
|Earnings Per Share Growth Rate||24.00%|
First Republic Bank, together with its subsidiaries, provides personalized relationship-based preferred banking and business banking, real estate lending, trust, and wealth management services to clients in metropolitan areas of the United States. First Republic Bank was founded in 1985 and is headquartered in San Francisco, California. It was formerly a subsidiary of Merrill Lynch & Co., Inc.
4) AOL, Inc. (AOL)
|Industry||Internet Information Providers|
|Earnings Per Share Growth Rate||101.67%|
AOL Inc. operates as a Web services company that offers a suite of brands and offerings for the worldwide audience. Its business spans online content, products, and services for consumers, publishers, and advertisers. The company provides content produced by journalists from new and traditional media, freelance writers and bloggers, and licensed content from third parties, as well as aggregations of user-generated content through sites, such as The Huffington Post, The Huffington Post Women, The Huffington Post Parents, and The Huffington Post Black Voices. It also operates Patch, a community-specific news and information platform that provides local coverage information for individual towns and communities; and MapQuest, which offers online mapping and directions services, as well as provides local directory listings through its AOL Yellow Pages product. The company was formerly known as AOL Holdings, LLC and changed its name to AOL Inc. in November 2009. AOL Inc. was founded in 1985 and is headquartered in New York, New York.
5) Grupo Aeroportuario Del Sureste SA de CV (ASR)
|Industry||Air Services, Other|
|Earnings Per Share Growth Rate||21.32%|
Grupo Aeroportuario del Sureste, S. A. B. de C. V., through its subsidiaries, holds concessions to operate, maintain, and develop airports in the southeast region of Mexico. The company operates nine airports located in the cities of Cancn, Cozumel, Mrida, Huatulco, Oaxaca, Veracruz, Villahermosa, Tapachula, and Minatitln. Grupo Aeroportuario del Sureste, S. A. B. de C. V. was founded in 1998 and is headquartered in Mexico City, Mexico.
6) Fossil, Inc. (FOSL)
|Industry||Recreational Goods, Other|
|Earnings Per Share Growth Rate||22.20%|
Fossil, Inc. designs, develops, markets, and distributes consumer fashion accessories worldwide. It offers watches under its proprietary brands, such as FOSSIL, MICHELE, RELIC, and ZODIAC; and under the licensed brand names, including ADIDAS, ARMANI EXCHANGE, BURBERRY, DIESEL, DKNY, EMPORIO ARMANI, MARC BY MARC JACOBS, and MICHAEL KORS. The company was founded in 1984 and is headquartered in Richardson, Texas.
7) Focus Media Holding Ltd. (FMCN)
|Earnings Per Share Growth Rate||69.48%|
Focus Media Holding Limited, a multi-platform digital media company, operates liquid crystal display network using audiovisual digital displays in China. The company engages in selling out-of-home advertising time slots on its network of flat-panel digital advertising displays located in high traffic areas of commercial, residential, and public buildings, such as malls, hotels, and the lobbies of apartment buildings, as well as in-store network. Focus Media Holding Limited is headquartered in Central, Hong Kong.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 10/15/2012.