The following ratings changes were generated on Thursday, Oct. 16
from buy to hold. Strengths include its revenue growth, notable return on equity and compelling growth in net income. Weaknesses include a decline in the stock price during the past year, generally poor debt management and poor profit margins.
Honda's revenue growth of 13.7% over the same quarter last year outpaced the industry average of 12.4%. Return on equity has improved slightly, outperforming both the industry average and the S&P 500. Net operating cash flow has significantly increased by 59.19% to $3,113.27 million, but Honda is still growing at a significantly lower rate than the industry average of 616.86%.
Honda's debt-to-equity ratio of 1.02 is relatively high when compared with the industry average, suggesting a need for better debt level management. The company also maintains poor quick ratio of 0.71, which illustrates the inability to avoid short-term cash problems. Shares plunged 37.95% on the year, apparently at least in part dragged down by the decline we have seen in the S&P 500. However, the stock is still more expensive (when compared with its current earnings) than most other companies in its industry.
( JOYG), a producer of mining equipment for the extraction of coal and other minerals and ores, from buy to hold. Strengths include its robust revenue growth, increase in net income and impressive record of earnings per share growth. Weaknesses include a generally disappointing performance in the stock itself, poor profit margins and weak operating cash flow.
At 45.5% since the same quarter last year, revenue growth came in higher than the industry average of 16.0%. Net income increased by 55.1%, from $72.90 million to $113.08 million, exceeding the net income growth of the S&P 500 and the machinery industry. The company has reported somewhat volatile earnings recently. EPS improved in the most recent quarter compared with the same quarter a year ago. During the past fiscal year, Joy Global reported lower earnings of $2.51, vs. $3.27 in the prior year. This year, the market expects an improvement in earnings to $3.44.
Joy Global's gross profit margin, at 30.6%, is lower than desirable, a decrease from the same quarter last year. Net profit margin of 12.5%, however, is above the industry average. Shares are down 50.84% on the year, underperforming the S&P 500. Despite the heavy decline in its share price, this stock is still more expensive (when compared with its current earnings) than most other companies in its industry
We've downgraded financial holding company
from buy to hold. Strengths include its expanding profit margins and reasonable valuation levels. Weaknesses include deteriorating net income, generally poor debt management and disappointing return on equity.
We consider JPMorgan's gross profit margin of 38.8% to be strong, though it has decreased significantly from the same period last year. Its 2.3% net profit margin trails the industry average. The 4.81 debt-to-equity ratio is very high and currently higher than the industry average, implying that there is very poor management of debt levels within the company. ROE has decreased from the same quarter one year prior, a clear sign of weakness within the company, and it underperforms the S&P 500 and the industry average.
, which provides technologically advanced products and services in information and services, aerospace, electronics and shipbuilding, from buy to hold. Strengths include its revenue growth, increase in net income and largely solid financial position with reasonable debt levels by most measures. Weaknesses include a generally disappointing performance in the stock itself, disappointing return on equity and poor profit margins.
Revenue growth of 9.5% since the same quarter one year prior slightly outpaced the 3.6% industry average, boosting EPS. Net income increased by 7.6%, from $460 million to $495 million, exceeding the revenue growth of the aerospace and defense industry average and outperforming the S&P 500. Northrop's debt-to-equity ratio is very low at 0.22 and is currently below the industry average, implying that there has been very successful management of debt levels. However, its quick ratio of 0.74 is somewhat weak and could be cause for future problems.
The company's current return on equity has slightly decreased from the same quarter one year prior, implying a minor weakness in the organization, and coming in significantly below the industry average ROE and the S&P 500. Gross profit margin of 20.5% is rather low, having decreased from the same quarter last year. Net profit margin of 5.7% trails the industry average.
, which designs, develops, manufactures and markets a variety of photovoltaic cells and modules, from hold to sell, based on its generally disappointing historical performance in the stock itself, generally weakdebt management and poor profit margins.
Currently, the debt-to-equity ratio of 1.52 is quite high overall and when compared with the industry average, suggesting that the current management of debt levels should be re-evaluated. However, Suntech has managed to keep a strong quick ratio of 1.65, which demonstrates the ability to cover short-term cash needs. Suntech's gross profit margin of 24.1% is rather low, though it has managed to increase from the same period last year. Suntech's net profit margin of 13.6%, however, compares favorably with the industry average.
ROE has improved slightly since the same quarter last year and exceeds the electrical equipment industry average and the S&P 500. Suntech reported significant EPS improvement int eh most recent quarter compared with the same quarter a year ago, and we feel its two-year positive EPS growth trend should continue, suggesting that business performance is improving. During the past fiscal year, Suntech increased its bottom line by earning $1.02 vs. 68 cents in the prior year. This year, the market expects further improvement to $1.64.
Shares are down 49.67% on the year, which is worse than the S&P 500's performance. Naturally, the overall market trend is bound to be a significant factor, and in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper(in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
Other ratings changes include
, downgraded from buy to hold, and
China Precision Steel
, downgraded from hold to sell.
All ratings changes generated on Oct. 16 are listed below.
Each business day, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates. While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows. However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company. For those reasons, we believe a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.
This article was written by a staff member of TheStreet.com Ratings.