Companies in search of additional funding find themselves both distracted and stalled when they don't have money lined up. Uncertainty about the future reins until a company obtains sufficient funding. That is why companies with a high level of liquidity repeatedly find themselves at an advantage over their competition. When they have access to self fund they can maintain operations if there is a lull in cash flow or they have the freedom to pursue growth objectives. For our scan today we pulled together a list of mid-cap stocks with sizable cash reserves and projected EPS growth rates above 25% for the next five years. We think you will find the list of mid cap stocks we have summarized below worthy of a second look.
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%). From here, 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-off point for your own analysis.
1) BioMarin Pharmaceutical Inc. (BMRN)
|5-Year Projected Earnings Per Share Growth Rate||36.00%|
BioMarin Pharmaceutical Inc. develops and commercializes biopharmaceuticals for serious diseases and medical conditions in the United States, Europe, Latin America, and rest of the world. The company's commercial products include Naglazyme, a recombinant form of N-acetylgalactosamine 4-sulfatase enzyme used for the treatment of mucopolysaccharidosis (MPS) VI; Kuvan, a proprietary synthetic oral form of 6R-BH4 used to treat patients with phenylketonuria (PKU), a metabolic disease; Aldurazyme used for the treatment of mucopolysaccharidosis I, a genetic disease; and Firdapse used to treat Lambert Eaton Myasthenic Syndrome, an autoimmune disease. BioMarin Pharmaceutical Inc. was founded in 1996 and its headquarters is in Novato, California.
2) Mellanox Technologies, Ltd. (MLNX)
|Industry||Semiconductor - Broad Line|
|5-Year Projected Earnings Per Share Growth Rate||69.33%|
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. Mellanox Technologies, Ltd. was incorporated in 1999 and its headquarters is in Yokneam, Israel.
3) Methanex Corp. (MEOH)
|5-Year Projected Earnings Per Share Growth Rate||40.00%|
Methanex Corporation, together with its subsidiaries, engages in the production, marketing and sale of methanol. The company also purchases and re-sells methanol produced by others. Methanex Corporation was founded in 1968 and its headquarters is in Vancouver, Canada.
4) Konami Corp. (KNM)
|Industry||Multimedia & Graphics Software|
|5-Year Projected Earnings Per Share Growth Rate||32.10%|
Konami Corporation develops, publishes, markets and distributes video game software products for stationary and portable consoles, and personal computers worldwide. It operates in four segments: Digital Entertainment, Health and Fitness, Gaming and Systems, and Pachinko and Pachinko Slot Machines. The company was formerly known as Konami Co., Ltd. and changed its name to Konami Corporation in 2000. Konami Corporation was founded in 1969 and its headquarters is in Tokyo, Japan.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 10/31/2012.