Three large-cap stocks analysts like

Wal-Mart, Colgate-Palmolive and Medco Health Solutions are TheStreet Ratings' favorite large-cap companies.

By TheStreet Staff Apr 13, 2010 10:59AM

TheStreetCost of prescription drugs © CorbisBy Jake Lynch, TheStreet

 

Large-cap stocks have lagged behind small- and mid-caps during the past year. TheStreet's quantitative equity model, which evaluates stocks based on fundamentals and performance, rates these large-cap stocks "buy." Analysts are overwhelmingly bullish on the shares.

 

3. Wal-Mart (WMT) is the world's largest retailer.

 

Quarter: Fourth-quarter profit increased 22% to $4.6 billion, or $1.23, as revenue grew 4.5% to $114 billion. The operating margin widened from 6.2% to 6.6%. Wal-Mart has $7.9 billion of cash and $41 billion of debt, translating to a debt-to-equity ratio of 0.6.

Stock: Wal-Mart has advanced 8% during the past year, trailing US indices. It trades at a price-to-earnings ratio of 15, a price-to-projected-earnings ratio of 13 and a price-to-cash-flow ratio of 7.9, 42%, 16% and 23% discounts to industry averages.

 

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Consensus: Of analysts following Wal-Mart, 23, or 79%, advise purchasing its shares and six recommend holding them. HSBC (HBC) projects the stock will climb 24% to $68. Bank of America (BAC) and Goldman Sachs (GS) predict the shares will hit $65.

 

2. Colgate-Palmolive (CL) makes toothpaste and soap.

 

Quarter: Fourth-quarter profit expanded 27% to $631 million, or $1.21, as revenue extended 11% to $4.1 billion. The operating margin rose from 23% to 25%. Colgate has $641 million of cash and $3.2 billion of debt, amounting to a debt-to-equity ratio of 1.

 

Stock: Colgate-Palmolive has risen 41% during the past 12 months, more than the Dow Jones Industrial Average ($INDU) and S&P 500 Index ($INX). It sells for a price-to-sales ratio of 2.7 and a price-to-cash-flow ratio of 13, 22% and 19% premiums to peer-group averages.

 

Consensus: Of researchers following Colgate-Palmolive, eight rate its stock "buy" and 13 rate it "hold." Goldman Sachs expects the stock to climb 17% to $99. UBS (UBS) believes it will hit $93 and RBC (RY) thinks the shares will touch $88.

 

1. Medco Health Solutions (MHS) is a mail-order pharmacy giant.

 

Quarter: Fourth-quarter profit increased 25% to $342 million, or 70 cents, as revenue grew 18% to $15 billion. The operating margin narrowed from 4% to 3.8%. Medco has $2.5 billion of cash and $4 billion of debt, translating to a debt-to-equity ratio of 0.6.

 

Stock: Medco has soared 53% during the past year, more than benchmarks. It trades at a price-to-sales ratio of 0.5 and a price-to-cash-flow ratio of 8.7, 35% and 12% discounts to industry averages. It's expensive based on projected earnings.

 

Consensus: Of firms covering Medco, 26, or 81%, advocate purchasing its shares and six advise holding them. Citigroup (C) offers a price target of $82, leaving a potential 28% of upside. Deutsche Bank (DB) sees the stock hitting $78.

 

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