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Express Scripts Stock Buy Recommendation Reiterated (ESRX)

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) -- Express Scripts (Nasdaq:ESRX) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, good cash flow from operations, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

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Highlights from the ratings report include:

  • ESRX's very impressive revenue growth greatly exceeded the industry average of 16.3%. Since the same quarter one year prior, revenues leaped by 125.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Providers & Services industry. The net income increased by 73.6% when compared to the same quarter one year prior, rising from $290.40 million to $504.10 million.
  • Net operating cash flow has significantly increased by 405.63% to $2,690.50 million when compared to the same quarter last year. In addition, EXPRESS SCRIPTS HOLDING CO has also vastly surpassed the industry average cash flow growth rate of -17.45%.
  • The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that ESRX's debt-to-equity ratio is low, the quick ratio, which is currently 0.64, displays a potential problem in covering short-term cash needs.
  • EXPRESS SCRIPTS HOLDING CO has improved earnings per share by 5.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EXPRESS SCRIPTS HOLDING CO reported lower earnings of $1.84 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($4.25 versus $1.84).

Express Scripts Holding Company provides a range of pharmacy benefit management (PBM) services primarily in the United States and Canada. It offers healthcare management and administration services on behalf of its clients. Express Scripts has a market cap of $48.5 billion and is part of the health care sector and health services industry. The company has a P/E ratio of 35.00, above the S&P 500 P/E ratio of 18.00. Shares are up 10.4% year to date as of the close of trading on Wednesday.

You can view the full Express Scripts Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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