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Covance Inc. Stock Upgraded (CVD)

NEW YORK (TheStreet) -- Covance (NYSE:CVD) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:

  • COVANCE INC has improved earnings per share by 11.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, COVANCE INC increased its bottom line by earning $2.17 versus $1.05 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $2.17).
  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.9%. Since the same quarter one year prior, revenues slightly increased by 8.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • CVD's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.03, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has significantly increased by 5640.73% to $45.43 million when compared to the same quarter last year. In addition, COVANCE INC has also vastly surpassed the industry average cash flow growth rate of 7.33%.
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Covance Inc., a drug development services company, provides various early-stage and late-stage product development services primarily to the pharmaceutical, biotechnology, and medical device industries worldwide. The company has a P/E ratio of 21.9, equal to the average health services industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Covance has a market cap of $2.76 billion and is part of the health care sector and health services industry. Shares are up 4.5% year to date as of the close of trading on Thursday.

You can view the full Covance Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet RatingsStaff

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