Every week, Q.ai screens a handful of securities plucked from various themes, courtesy of the Forbes AI Investor platform and our artificial intelligence algorithms. This week, we’re taking a look at one of the largest overarching segments in the stock market: companies with a market capitalization of $10 billion. Welcome to U.S. Large Cap Stocks.
Market capitalization is the total value of all outstanding (investor-owned) shares of a corporation. In the United States, a company is considered a large cap, sometimes called a big cap, once it reaches a market cap of $10 billion or more, while small- and mid-cap (SMID) stocks have a capitalization between $300 million and $10 billion.
Large caps are the most numerous stocks in the United States equities marketplace, accounting for over 90% of all traded names. They tend to be more stable than their small-cap counterparts, especially when investors bolster their prices and flock to these safe havens during choppy seasons. They’re also often considered “core” portfolio investments thanks to their increased transparency, stability, innovative capacity, and regular dividend payments.
That said, large caps aren’t perfect – far from it. Such mature companies often have little wiggle room for growth in both their balance sheets and their stock prices, and their bulk means they struggle to change course when economics or government policies demand.
But if you’re a new investor looking for a place to start, or a seasoned investor seeking new large cap names for your portfolio, Q.ai’s carefully curated list might just hit the spot.
Q.ai runs daily factor models to get the most up-to-date reading on stocks and ETFs. Our deep-learning algorithms use Artificial Intelligence (AI) technology to provide an in-depth, intelligence-based look at a company – so you don’t have to do the digging yourself.
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Lululemon Athletica, Inc (LULU)
Lululemon Athletica, Inc nudged down 0.01% Friday to end the day at $388.33 per share. The stock saw 712,426 trades on the day as it closed down more than $13 from its 10-day price average. Currently, Lululemon sits up 11.6% for the year and trades at 53.9x forward earnings.
Lululemon is a Canadian-American athleticwear retailer (read: yoga pants purveyor that has since expanded into other stretchy, comfortable clothing) founded in 1998. The company maintains a large online presence as well as nearly 500 international storefronts.
Products include yoga attire, athleticwear, sweaters, jackets, and undergarments, alongside hair accessories, yoga mats, and water bottles. Lululemon also produces several unique (and trademarked) fabrics for its product lines, beginning with Luon in 2005.
In the news, Lululemon has made headlines as investors gear up for the company’s Q2 earnings results, slated to be released on 8 September. Many are expecting slower growth compared to the company’s most recent outstanding results, though strong performance across apparel categories and selling channels is expected to continue.
Over the last three years, Lululemon has certainly worked to cement its fundamentals to bolster its status as a U.S. large cap. Revenue rose 51.3% to $4.4 billion compared to $3.3 billion three fiscal years prior, with operating income leaping almost 39% from $706 million to $813 million. And per-share earnings hit 49.3% growth over three years, surging from $3.61 to $4.50. That said, return on equity toppled slightly from 31.8% to 26.1%.
At this time, Lululemon is expected to see around 3.3% revenue growth in the next 12 months. Our AI rates this Large Cap athletic and yoga retailer A in Low Volatility Momentum and Quality Value and F in Technicals and Growth.
Kansas City Southern (KSU)
Kansas City Southern slid 1.5% Friday, closing out the session at $291.63 per share on the back of 1.2 million trades. The stock sits up almost 43% for the year, though it’s slipped 13 cents from the 10-day price average. At this time, Kansas City Southern trades at 30x forward earnings.
Kansas City Southern (KCS) is a Delaware-registered holding company that specializes in North American railroad investments. Although it’s the smallest of the major North American railways, it made headlines in early 2021 as two rivals – Canadian Pacific (CP) and Canadian National (CN) – held a bidding war to buy out the railway. Ultimately, Canadian National won in May.
As a result, KCS made our thematic screen last time we covered U.S. Large Cap Stocks as the company awaited regulatory approval for the merger following criticism by the White House. In response, CN proposed a trust to buy and hold the smaller company – a move that was swiftly condemned as a “mockery” of the U.S. Surface Transportation Board’s authority.
Since then, KCS appears to have switched sides, following a declaration by the KCS board that CP may have made a “superior” bid on 10 August compared to CN’s May bid. And on 31 August, the U.S. Surface Transportation Board ruled that CN could not put KCS into an independent voting trust, further exacerbating the larger railroad’s machinations.
Railroad bidding wars may seem like they belong in the past – but with KCS showing strong fundamentals in the pandemic year, it’s easy to see why its rivals are desperate for dominance. Over the last three years, KCS saw revenue decline slightly from $2.7 billion to $2.6 billion, though operating income grew from $968 million to $1.04 billion. Per-share earnings also grew from $6.13 to $6.54 as return on equity nicked up from 12.6% to 13.6%.
Currently, Kansas City Southern is expected to see forward 12-month revenue growth around 5%. Our AI rates this U.S. Large Cap stock A in Growth, Low Volatility Momentum, and Quality Value, though it’s earned an F in Technicals.
Commercial Metals Company (CMC)
Commercial Metals Company slipped 0.5% Friday, trading 461,284 shares to a final price of $31.94. The stock sits up 55.5% for the year and trades at 8.8x forward earnings.
Commercial Metals Company is a metal and steel manufacturer based in Texas that owns 41 scrap metal recycling facilities in the United States and 12 in Poland. The company was first founded in 1915 as a scrap trading company, though it’s expanded and adapted considerably since then, capped off by its 1994 acquisition of Owen Steel Company for $87 million.
Though Commercial Metals Company is trading near its 2008 highs this year, the company’s stock has begun to shrink after uninspiring earnings performance in its recent quarterly reports scared off investors. However, as the United States’ largest fabricator and manufacturer of steel reinforcing bar, and with various building construction and sales slowly picking up again, CMC management is hopeful that the future is bright for the steel company.
Over the last three fiscal years, CMC’s revenue surged 31.5% from $4.6 billion to $5.5 billion, with operating income doubling from $220 million to $440 million. Meanwhile, per-share earnings leapt 131% from $1.17 to $2.32, with return on equity rising from 9.3% to 15.8%.
Currently, CMC is expected to see forward 12-month revenue growth around 12.3%. Our AI rates this U.S. Large Cap investment A in Growth, Low Volatility Momentum, and Quality Value, though it, too, has earned an F in Technicals.
The Toro Company (TTC)
The Toro Company popped up 0.8% Friday to $109.81 per share, ending the session with 384,567 trades on the docket. The stock sits up 15.6% for the year, though below the 22-day price average of $111.72. At this time, Toro trades at 29.5x forward earnings.
The Toro Company is an American business that designs, manufactures, and markets a range of outdoor equipment, including snow removal products, irrigation system supplies for commercial and residential properties, and lawn mowers, among other items. It operates under such names and segments as Boss Snowplow, Dingo, Irritrol Systems, Lawn Genie, and of course, Toro.
Toro made headlines last week upon releasing its Q3 2021 earnings results. The company reported net sales of $977 million, up 16.2% YOY, with net earnings coming in at $96.3 million for 8.3% gains YOY. All told, EPS grew 8.5% from the year-ago quarter to 89 cents per share. As a result of the company’s strong performance and ongoing demand, management raised its full-year 2021 guidance to net sales growth of 17%, compared to the 15% previously expected.
Over the last three fiscal years, Toro’s revenue grew 46.6% to $3.4 billion from $2.6 billion, with operating income climbing 40.7% $373 million to $432 million. Meanwhile, per-share earnings rose from $2.50 to $3.03. However, return on equity fell from 42.3% to 33.4% in the 36-month-period.
Currently, The Toro Company is rated positively by our AI, with As in Technicals, Growth, and Low Volatility Momentum – though it’s earned an F in Quality Value.
Nordson Corporation (NDSN)
Nordson Corporation nicked down 0.5% Friday to close out the day at $241.45 per share with 209,672 trades on the docket. The stock sits up 20.2% for the year and more than $10 over the 22-day price average. Currently, Nordson Corporation trades at 27.8x forward earnings.
Nordson Corporation is an American multinational that designs and manufactures dispensers for industrial and consumer adhesives, coatings, and sealants. Nordson also manufactures testing and inspection equipment for electronic components, tech-based curing and surface treatment processing systems, and medical devices, among other items.
Nordson Corporation released its Q3 2021 earnings results on 30 August, noting that quarterly sales, operating profit, and per-share earnings all topped company records. Sales came in at $647 million for the quarter, a 20% increase YOY, as operating profit hit $188 million for a whopping 57% increase from the year-ago quarter. All told, earnings per share grew 70% to $2.42, with net income coming in at $142 million.
Over the last three fiscal years, Nordson’s revenue slipped from $2.25 billion to $2.12 billion as operating income fell from $498 million to $427 million. Per-share earnings also fell to $4.27 from $6.40, with return on equity plunging to nearly half its value at 15%.
At this time, Nordson is expected to see 12-month revenue growth around 5.4%. Our AI rates this U.S. Large Cap stock A in Technicals, Growth, and Quality Value, and F in Low Volatility Momentum.
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