Rating Change #6
CareFusion Corp (CFN) has been downgraded by TheStreet Ratings from buy to hold. 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 attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and a generally disappointing performance in the stock itself.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.2%. Since the same quarter one year prior, revenues slightly increased by 9.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Although CFN's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 2.77, which clearly demonstrates the ability to cover short-term cash needs.
- 50.00% is the gross profit margin for CAREFUSION CORP which we consider to be strong. Regardless of CFN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CFN's net profit margin of 3.40% is significantly lower than the same period one year prior.
- CFN has underperformed the S&P 500 Index, declining 8.88% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income has significantly decreased by 31.1% when compared to the same quarter one year ago, falling from $45.00 million to $31.00 million.