Color to the Numbers: Top Large-Cap Value Stocks

Thanks to the Internet and sites such as Yahoo! and MSN Money, investors have more tools than ever to search for stock ideas by running screens. But screens often return numerous stocks that need to be weeded out because the numbers don't tell the whole story. Maybe the massive growth at one company was due to one-time tax adjustments, not core operations, for instance.

Just like the color-by-numbers books for kids, the picture for stocks pulled from any screen isn't clear until we add the appropriate hues. In this edition of "Color to the Numbers," we'll enlist Motley Fool CAPS for a Foolish look at a screen for large-cap value stocks, examining which stocks merit further investigation, and which should be cast aside.

Better a screen than a window
The community of knowledgeable investors who rate stocks in CAPS will help us in our search. In CAPS, investors can see how the collective community rates a company and can compare that rating with the opinions of the very best All-Star stock pickers -- CAPS players with a ranking greater than 80. There are even pitch commentaries and blogs to lend detail to the bull and bear opinions. In all, CAPS gives investors qualitative resources far beyond mere numbers and tables.

To run this screen, we'll use the following criteria:

• Market cap of at least $5 billion
• A debt-to-equity ratio of less than 0.5
• Free cash flow of at least $100 million
• A projected five-year earnings growth rate of at least 15%
• A forward price-to-earnings ratio of less than 15.

This should give us the cream of the crop in terms of companies on a solid foundation with decent expectations for earnings growth. But numbers alone don't make a company a good investment. This is where CAPS can really help.

Opinions with the numbers
Here's a sampling from the list of stocks our screen pulled up today.

Drilling deeper
Contract driller Pride International's forward P/E of only 9.1 tells investors -- at least numerically -- that the stock is the best value on our list today. I have to admit, with an estimated growth rate of 37% for the next five years, Pride certainly has my eyebrows up, so let's take a closer look.

Pride is one the world's largest oil drilling contractors, with 68 rigs involved in land-based and offshore drilling. The firm has been selling assets -- most recently there's been a plan to sell three of its tender-assist rigs -- to generate cash to invest in two more ultra-deepwater drill ships. Operating its rigs for clients such as BP and ExxonMobil, Pride is hoping to position itself ahead of the competition and keep the day rates that have fueled its profits for years well above sea level.

Only three bearish investors out of 220 have given an opinion on Pride in CAPS, so we don't find many naysayers for the contract driller. While I'm no oil buff, repositioning a company out of highly competitive areas and into more specialty drilling categories seems to be a smart move with long-term benefits.

All aboard
There's a very easy way to determine whether a stock is considered a value play -- if Warren Buffett's Berkshire Hathaway has a stake in a company, odds are good that you're looking at a large-cap value stock. Union Pacific is one railroader Buffett has taken a fancy to lately; rail transportation is now gaining advantages in pricing power over other modes of freight. Lots of CAPS investors agree with Buffett on Union Pacific as well, with 127 of 129 CAPS All-Stars rating the company highly, believing it will beat the S&P going forward.

Let 71,000 investors be the judge
The collective wisdom of a huge pool of investors can quickly add color to a whitewashed page of numbers. But even with an entire community of qualified opinions acting as judge, individual investors are still the jury and should perform their own research.

Want to see your favorite screen results run through the CAPS community wringer? It's free to tap the knowledge base -- and give your own opinion -- in Motley Fool CAPS.