Rating Change #1
Orix Corporation (IX) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally poor debt management 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 19.6%. Since the same quarter one year prior, revenues slightly increased by 6.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ORIX CORP reported significant earnings per share improvement 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ORIX CORP increased its bottom line by earning $3.95 versus $2.94 in the prior year. This year, the market expects an improvement in earnings ($6.45 versus $3.95).
- The gross profit margin for ORIX CORP is rather high; currently it is at 50.40%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 13.80% trails the industry average.
- IX has underperformed the S&P 500 Index, declining 11.07% 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 debt-to-equity ratio is very high at 3.29 and currently higher than the industry average, implying that there is very poor management of debt levels within the company.
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