Rating Change #3
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, growth in earnings per share, solid stock price performance and notable return on equity. 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:
- The revenue growth came in higher than the industry average of 12.6%. Since the same quarter one year prior, revenues slightly increased by 3.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.42, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, PLL has a quick ratio of 1.81, which demonstrates the ability of the company to cover short-term liquidity needs.
- PALL CORP has improved earnings per share by 11.1% 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, PALL CORP increased its bottom line by earning $2.38 versus $2.36 in the prior year. This year, the market expects an improvement in earnings ($3.08 versus $2.38).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Machinery industry and the overall market on the basis of return on equity, PALL CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
Pall Corporation engages in manufacturing and marketing filtration, purification, and separation products and integrated systems solutions worldwide. The company has a P/E ratio of 24.7, above the S&P 500 P/E ratio of 17.7. Pall has a market cap of $7.49 billion and is part of the industrial goods sector and industrial industry. Shares are up 12.7% year to date as of the close of trading on Friday.
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