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Royal Philips NV Stock Downgraded (PHG)

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) -- Royal Philips (NYSE: PHG) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.

  • 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:

  • 45.80% is the gross profit margin for KONINKLIJKE PHILIPS 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 3.06% trails the industry average.
  • The current debt-to-equity ratio, 0.41, 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 0.76 is somewhat weak and could be cause for future problems.
  • Net operating cash flow has significantly decreased to -$356.29 million or 173.40% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Industrial Conglomerates industry average. The net income has decreased by 15.0% when compared to the same quarter one year ago, dropping from $242.68 million to $206.34 million.
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Koninklijke Philips N.V. engages in the healthcare, lighting, and consumer lifestyle businesses worldwide. The company has a P/E ratio of 76.4, above the S&P 500 P/E ratio of 17.7. Royal Philips has a market cap of $25.6 billion and is part of the industrial goods sector and industrial industry. Shares are up 8.1% year to date as of the close of trading on Tuesday.

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

-- Written by a member of TheStreet Ratings Staff

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