The McGraw-Hill Companies (MHP) sells information services and products to the education, financial services and business information markets worldwide. It has been downgraded to hold from buy.
The company's third-quarter revenue increased 9.8% compared with the same period last year, exceeding the industry average of 8.0%. McGraw-Hill's earnings rose 26.4% to $1.34 per share from $1.06 a share over the same time frame. This continued a two-year pattern of EPS growth, a trend TheStreet.com Ratings believes will continue.
The company's debt-to-equity ratio is somewhat low at 0.77, and less than the industry average, implying that there has been a relatively successful effort in the management of debt levels. Still, its quick ratio of 0.50 is very weak and demonstrates a lack of ability to pay short-term obligations. Investors have so far failed to pay attention to McGraw-Hill's earnings improvements, as its stock price has fallen by 35.6% in the last 12 months. While it is now cheaper (in proportion to its earnings over the past year) than most other stocks in its industry, we do not feel the stock is a good buy right now because of other concerns. McGraw-Hill had been rated a buy since December 2005.