Forbes
Special Report
Special Report: The 100 Best Mid-Cap Stocks In America
Brian Zajac, 10.07.09, 6:00 PM ET
Mid-cap growth companies would be right up Goldilocks' alley: Not too hot and not too cold. They strike a sensible balance between small companies that might not be able to sustain their past performance and big companies that may be past their prime. This year's select list of 100 companies shows a unique combination of growth, financial stability and promising forecasts for the coming years.
The reason why this segment of the market should not be overlooked by investors is evidenced in our historical price charts comparing the stock performance of Standard & Poor's indexes representing three different size categories of the stock market over one-year, five-year and 10-year periods.
Mid-cap stocks have more than held their own in this volatile market. Through Sept. 28, the S&P MidCap 400 index shows a 0.8% decline for the past 12 months. Over the same period, the large-cap S&P 500 and the S&P SmallCap 600 indexes show declines of 4% and 8%, respectively. For the past five years, the annualized price return of the S&P MidCap 400 Index is 3.2%. That compares to a 2.0% gain for the S&P SmallCap 600 index and a 0.9% decline in the S&P 500 index over the same time period.
Forbes' fifth annual listing of the Best Mid-Cap Companies in America reflects an elite group of 100 firms that have demonstrated better profitability and growth than their peers. Our portfolio of best mid-caps from last year, despite tough market conditions, slightly outperformed the S&P MidCap 400 Index over the past 12 months. You can read about the best and worst movers from last year's list in our Winners and Losers feature. Because of our rigid screening process and the limitation of the market value range, only 16 companies returned to our best mid-cap list this year.
Our definition of mid-cap companies is public corporations with a market value between $750 million and $3.3 billion. To compile the 100 best, we put more than 1,000 companies that fit our market value requirement through a screen for profitability and growth over the past year. We also require companies to have five-year forecasted earnings growth of at least 7% a year from Thomson IBES. We gave the remaining companies rankings for latest 12-month and five-year growth in sales, earnings and return on equity. We give more weight to the long-term results and also factor in balance sheet strength.
From these rankings, we next reviewed corporate news and security analyst reports on each firm. We eliminated companies that have significant legal problems or other problems that might hinder future growth. We checked Accounting and Governance Risk ratings from Audit Integrity. This independent research firm, based in New York and Los Angeles, scores companies higher for having more transparent accounting methods and more shareholder-friendly governance practices.
At the top of the list this year is Myriad Genetics, a health care firm that makes diagnostic testing products to determine the risk of diseases such as breast or ovarian cancer. With revenue growth of 43% over the past five years and 47% over the latest year, the debt-free Myriad outscored the rest of the best. In addition, analysts from Thomson IBES are expecting annual earnings per share growth of 25% over the next three to five years.
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