Editor's Note: 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 NEW YORK (TheStreet) -- Warner Chilcott (Nasdaq:WCRX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and weak operating cash flow.
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- The gross profit margin for WARNER CHILCOTT PLC is currently very high, coming in at 90.60%. 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 8.30% trails the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.9%. Since the same quarter one year prior, revenues slightly dropped by 4.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, WARNER CHILCOTT PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Pharmaceuticals industry. The net income has significantly decreased by 26.2% when compared to the same quarter one year ago, falling from $71.85 million to $53.00 million.
- The debt-to-equity ratio is very high at 15.70 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, WCRX maintains a poor quick ratio of 0.94, which illustrates the inability to avoid short-term cash problems.
-- Written by a member of TheStreet Ratings Staff
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