We've downgraded Covidien (COV), which engages in the development, manufacture and sale of health care products for use in clinical and home settings worldwide, from hold to sell, driven by its weak operating cash flow.
Net operating cash flow has decreased to $512 million, or 18.85% when compared with the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower. Despite currently having a low debt-to-equity ratio of 0.39, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. The company's quick ratio of 1.44 is sturdy. Covidien's gross profit margin for is rather high at 58.7%, having increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.90% trails the industry average. On the basis of return on equity, Covidien has underperformed the health care equipment and supplies industry but outperformed the S&P 500.
Shares are down 9.8%, reflecting, in part, the market's overall decline, investors ignoring the increase in its earnings per share. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
We've downgraded diversified energy company National Fuel Gas (NFG) from buy to hold. Strengths include its robust revenue growth, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and a decline in the stock price during the past year.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV