TSC Ratings' Updates: HealthSouth

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

The following ratings changes were generated on Thursday, May 28.

We rate HealthSouth (HLS Quote) a hold. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks.

The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.

Revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 2.3%. Growth in the company's revenue appears to have helped boost the earnings per share. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.84 is weak.

We rate Kimberly-Clark (KMB Quote) a buy. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations and expanding profit margins.

We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated.

The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Household Products industry and the overall market, Kimberly-Clark's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.