When it comes to investments, some people prefer the large-cap sector because these companies are viewed as more established and experienced. In addition, these companies typically attract highly skilled management to hone operations, encourage growth and bring in profits. To find large-cap stocks that are worthy of a deeper analysis, we searched for companies that are generating strong profits and have substantial cash reserves. These are the assets that attract investors because it points to a solid, well managed and healthy company. Review the list of large-cap stocks below to see if you agree.
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.
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 large-cap stocks. We next screened for businesses that have achieved strong bottom line profitability (Net Margin [TTM]>10%) (1-year fiscal EPS growth rate>10%). From here, we then looked for companies 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 large-cap stocks are in strong positions for future growth? Use our screened list as a starting point for your own analysis.
1) CF Industries Holdings, Inc. (NYSE:CF)
|Earnings Per Share Growth Rate||311.81%|
CF Industries Holdings, Inc., through its subsidiary, CF Industries, Inc., manufactures and distributes nitrogen and phosphate fertilizer products, serving agricultural and industrial customers worldwide. It operates in two segments, Nitrogen and Phosphate. The Nitrogen segment principally offers ammonia, granular urea, urea ammonium nitrate solution, urea liquor, diesel exhaust fluid and aqua ammonia. The Phosphate segment primarily offers diammonium phosphate and monoammonium phosphate. The company also owns 50% interests in the GrowHow UK Limited, a nitrogen products producer in the United Kingdom; Point Lisas Nitrogen Limited, an ammonia producer; and KEYTRADE AG, a global fertilizer trading company. CF Industries Holdings' customers include cooperatives and independent fertilizer distributors primarily in the midwestern United States. The company was founded in 1946 and its headquarters is in Deerfield, Illinois.
2) ARM Holdings plc (NASDAQ:ARMH)
|Industry||Semiconductor - Specialized|
|Earnings Per Share Growth Rate||28.75%|
ARM Holdings plc designs reduced instruction set computing (RISC) microprocessors, physical intellectual property, and related technology and software. Its products and services include 16/32-bit RISC microprocessors cores, data engines, graphics intellectual property, and on-chip fabric intellectual property; embedded software; physical intellectual property; development tools; and consulting, support, and maintenance services. The company licenses and sells its technology and products to electronics companies, which in turn manufacture, market, and sell microprocessors, application-specific integrated circuits, and application-specific standard processors to systems companies for incorporation into various end products.
ARM Holdings is establishing RISC processor architecture and physical intellectual property for use in various high-volume embedded microprocessor applications, including digital cellular phones, modems and automotive functions, as well as in smart cards and digital video. It offers its products and services in Europe, the United States, and the Asia Pacific. The company was founded in 1990 as Advanced RISC Machines Holdings Limited and changed its name to ARM Holdings plc in 1998. ARM Holdings is based in Cambridge, the United Kingdom.
3) Chemical & Mining Co. of Chile Inc. (NYSE:SQM)
|Industry||Chemicals - Major Diversified|
|Earnings Per Share Growth Rate||42.82%|
Chemical and Mining Company of Chile Inc. engages in the production and sale of fertilizers and specialty chemicals in Chile and internationally. The company's specialty plant nutrients include potassium nitrate, sodium nitrate, sodium potassium nitrate, and specialty blends for crops, such as vegetables, fruits, flowers, potatoes and cotton, as well as Ultrasol for application via fertigation; Qrop for field application; Speedfol for foliar application; Allganic for organic farming; and Nutrilake for aquaculture. It also produces iodine and iodine derivatives, which are used in a range of medical, pharmaceutical, agricultural and industrial applications, including X-ray contrast media, polarizing films for liquid crystal displays (LCDs), antiseptics, biocides and disinfectants; and in the synthesis of pharmaceuticals, herbicides, electronics, pigments, dye components and heat stabilizers.
In addition, the company provides lithium carbonate for use in various applications and lithium hydroxide, which is used as a raw material in the lubricating grease industry. Further, it offers various industrial chemicals, such as sodium nitrate, potassium nitrate, and boric acid; and potassium chloride and potassium sulfate. The company was founded in 1968 and is based in Santiago, Chile.
4) Las Vegas Sands Corp. (NYSE:LVS)
|Industry||Resorts & Casinos|
|Earnings Per Share Growth Rate||203.87%|
Las Vegas Sands Corp., together with its subsidiaries, owns, develops, and operates various integrated resort properties primarily in the United States, Macau, and Singapore. It owns and operates The Venetian Resort Hotel Casino, The Palazzo Resort Hotel Casino, and The Sands Expo and Convention Center in Las Vegas, Nevada; and the Sands Macao casino, The Venetian Macao Resort Hotel, and the Four Seasons Hotel Macao in Macau, the People's Republic of China. The company also owns and operates the Marina Bay Sands, a 55-story hotel towers in Singapore; and the Sands Casino Resort Bethlehem in Bethlehem, Pennsylvania. Las Vegas Sands Corp. was founded in 1988 and is based in Las Vegas, Nevada.
5) QUALCOMM Incorporated (NASDAQ:QCOM)
|Earnings Per Share Growth Rate||27.38%|
QUALCOMM Incorporated designs, develops, manufactures, and markets digital telecommunications products and services. It operates in four segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), Qualcomm Wireless and Internet (QWI), and Qualcomm Strategic Initiatives (QSI). The QCT segment develops and supplies integrated circuits and system software based on code division multiple access (CDMA), orthogonal frequency division multiple access (OFDMA), and other technologies for use in voice and data communications, networking, application processing, multimedia, and global positioning systems.
The QTL segment grants licenses to use portions of the its intellectual property portfolio, which includes patent rights useful in the manufacture and sale of certain wireless products. The QWI segment is involved in providing Qualcomm Internet Services, which offers content enablement services for the wireless industry, and push-to-talk and other products and services for wireless network operators; Qualcomm Government Technologies that provides development, hardware, and analytical services to the United States government agencies; Qualcomm Enterprise Services, which offers satellite and terrestrial-based two-way wireless information and position reporting services to transportation and logistics companies and other enterprise companies with fleet vehicles; and Firethorn that builds and manages software applications to enable mobile commerce services.
The QSI segment invests in early-stage companies that support the design and introduction of new products and services, as well as holds spectrum licenses. The company operates primarily in China, South Korea, Taiwan, Japan, and the United States. QUALCOMM Incorporated was founded in 1985 and its headquarters is in San Diego, California.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/05/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.