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 (
) 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 revenue growth, notable return on equity, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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Highlights from the ratings report include:
- AET's revenue growth trails the industry average of 26.1%. Since the same quarter one year prior, revenues slightly increased by 5.9%. 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 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 Health Care Providers & Services industry and the overall market, AETNA INC's return on equity exceeds that of both the industry average and the S&P 500.
- The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that AET's debt-to-equity ratio is low, the quick ratio, which is currently 0.61, displays a potential problem in covering short-term cash needs.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
Aetna Inc. operates as a diversified health care benefits company in the United States. The company operates in three segments: Health Care, Group Insurance, and Large Case Pensions. The company has a P/E ratio of 7.7, equal to the average health services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Aetna has a market cap of $13.07 billion and is part of the
industry. Shares are down 8% year to date as of the close of trading on Thursday.
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--Written by a member of TheStreet Ratings Staff.
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