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 impressive record of earnings per share growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.
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Highlights from the ratings report include:
- EATON CORP has improved earnings per share by 15.5% 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, EATON CORP increased its bottom line by earning $3.94 versus $2.72 in the prior year. This year, the market expects an improvement in earnings ($4.35 versus $3.94).
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.01, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $469.00 million or 33.61% when compared to the same quarter last year. In addition, EATON CORP has also vastly surpassed the industry average cash flow growth rate of -37.12%.
- 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, EATON CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
Eaton Corporation operates as a diversified power management company worldwide. The company has a P/E ratio of 11, above the average industrial industry P/E ratio of 10.9 and below the S&P 500 P/E ratio of 17.7. Eaton has a market cap of $15.36 billion and is part of the
industry. Shares are up 6.5% year to date as of the close of trading on Tuesday.
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--Written by a member of TheStreet Ratings Staff.