TSC Ratings' Updates: Thoratec

The following ratings changes were generated on Wednesday, Dec. 24.

We've downgraded Ametek(AME Quote), which manufactures and markets electronic instruments and electromechanical devices, from buy to hold. Strengths include its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, we also find weaknesses including a decline in the stock price during the past year and poor profit margins.

Return on equity has improved slightly since the same quarter a year ago, outperforming the S&P 500 but underperforming the electrical equipment industry. Ametek's gross profit margin of 33.1% is low, though it has increased since the same period last year. Its net profit margin of 11% trails the industry average.

Revenue rose by 22.4% since the same quarter a year ago, exceeding the industry average growth of 10.1% and helping boost earnings per share, which improved 24.5% in the most recent quarter compared with the same quarter a year ago. The company has demonstrated a pattern of positive EPS growth over the past two years, which we feel should continue, suggesting improving business performance. During the past fiscal year, it earned $2.12 vs. $1.71 in the prior year, and this year, the market expects further improvement to $2.55.

Shares are down 38.8% on the year. Naturally, the overall market trend is bound to be a significant factor, and in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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