Rating Change #4
Sensata Technologies Holding N.V. (ST) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, notable return on equity, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
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Highlights from the ratings report include:
- SENSATA TECHNOLOGIES HLDG NV 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. During the past fiscal year, SENSATA TECHNOLOGIES HLDG NV increased its bottom line by earning $0.97 versus $0.02 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus $0.97).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electrical Equipment industry. The net income increased by 191.0% when compared to the same quarter one year prior, rising from $24.38 million to $70.94 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Electrical Equipment industry and the overall market on the basis of return on equity, SENSATA TECHNOLOGIES HLDG NV has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has increased to $112.66 million or 34.89% when compared to the same quarter last year. Despite an increase in cash flow, SENSATA TECHNOLOGIES HLDG NV's cash flow growth rate is still lower than the industry average growth rate of 46.41%.
- 36.30% is the gross profit margin for SENSATA TECHNOLOGIES HLDG NV which we consider to be strong. Regardless of ST's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ST's net profit margin of 15.92% compares favorably to the industry average.
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