NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.
Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 2.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.75, 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 ESLT's debt-to-equity ratio is low, the quick ratio, which is currently 0.55, displays a potential problem in covering short-term cash needs.
- ESLT's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 28.93%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, 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.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Aerospace & Defense industry. The net income has decreased by 19.3% when compared to the same quarter one year ago, dropping from $45.25 million to $36.51 million.
Elbit Systems Ltd. engages in the design, development, manufacture, and integration of defense systems and products worldwide. The company has a P/E ratio of 9.2, below the average aerospace/defense industry P/E ratio of 17.3 and below the S&P 500 P/E ratio of 17.7. Elbit Systems has a market cap of $1.77 billion and is part of the
industry. Shares are down 12.3% year to date as of the close of trading on Tuesday.
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-- Written by a member of TheStreet Ratings Staff