Rating Change #4
Koninklijke Philips Electronics NV (PHG) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. 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:
- The revenue growth greatly exceeded the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 31.9%. 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 1464.01% to $768.35 million when compared to the same quarter last year. In addition, PHILIPS ELECTRONICS (KON) NV has also vastly surpassed the industry average cash flow growth rate of -58.71%.
- 44.10% is the gross profit margin for PHILIPS ELECTRONICS (KON) NV which we consider to be strong. 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 2.80% trails the industry average.
- The current debt-to-equity ratio, 0.39, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.83 is somewhat weak and could be cause for future problems.
- PHILIPS ELECTRONICS (KON) NV's earnings per share declined by 20.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, PHILIPS ELECTRONICS (KON) NV swung to a loss, reporting -$1.05 versus $2.06 in the prior year. This year, the market expects an improvement in earnings ($1.27 versus -$1.05).