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Simcere Pharmaceutical Group Stock Upgraded (SCR)

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) -- Simcere Pharmaceutical Group (NYSE: SCR) 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, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 5.3%. 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.
  • The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.07, which illustrates the ability to avoid short-term cash problems.
  • SIMCERE PHARMACTCL GRP -ADR has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, SIMCERE PHARMACTCL GRP -ADR reported lower earnings of $0.17 versus $0.51 in the prior year. This year, the market expects an improvement in earnings ($0.37 versus $0.17).
  • The gross profit margin for SIMCERE PHARMACTCL GRP -ADR is currently very high, coming in at 81.20%. Regardless of SCR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SCR's net profit margin of -3.63% significantly underperformed when compared to the industry average.
  • In its most recent trading session, SCR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
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Simcere Pharmaceutical Group engages in the research, development, manufacture, and distribution of pharmaceutical and vaccine products for pharmaceutical distributors and government in the People's Republic of China. The company has a P/E ratio of 53.6, above the S&P 500 P/E ratio of 17.7. Simcere Pharmaceutical Group has a market cap of $481.6 million and is part of the health care sector and drugs industry. Shares are up 14.6% year to date as of the close of trading on Wednesday.

You can view the full Simcere Pharmaceutical Group Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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.

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