NEW YORK (TheStreet) -- Eli Lilly and Company (NYSE:LLY) has been reitereated by TheStreet Ratings as a buy with a ratings score of A. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow.Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.35, which illustrates the ability to avoid short-term cash problems.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.3%. Since the same quarter one year prior, revenues slightly dropped by 4.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for LILLY (ELI) & CO is currently very high, coming in at 85.50%. Regardless of LLY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 18.00% trails the industry average.
--Written by a member of TheStreet Ratings Staff. TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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