Aetna Inc Stock Buy Recommendation Reiterated (AET)

NEW YORK (TheStreet) -- Aetna (NYSE:AET) has been reiterated 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 revenue growth, attractive valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:

• Despite its growing revenue, the company underperformed as compared with the industry average of 12.9%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
• Net operating cash flow has significantly increased by 78.20% to $1,019.70 million when compared to the same quarter last year. Despite an increase in cash flow, AETNA INC's cash flow growth rate is still lower than the industry average growth rate of 114.72%.
• The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that AET's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
• The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market on the basis of return on equity, AETNA INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

Aetna Inc. operates as a diversified health care benefits company in the United States. The company operates in three segments: Health Care, Group Insurance, and Large Case Pensions. The company has a P/E ratio of 7.9, equal to the average health services industry P/E ratioand below the S&P 500 P/E ratio of 17.7. Aetna has a market cap of $14.13 billion and is part of the health care sector and health services industry. Shares are down 3.6% year to date as of the close of trading on Wednesday.

You can view the full Aetna Ratings Report or get investment ideas from our investment research center.

--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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