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 A+ . The company's strengths can be seen in multiple areas, such as its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year, increase in net income and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that NVS's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, 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.
- The net income growth from the same quarter one year ago has exceeded that of the Pharmaceuticals industry average, but is less than that of the S&P 500. The net income increased by 0.1% when compared to the same quarter one year prior, going from $2,704.00 million to $2,706.00 million.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.9%. Since the same quarter one year prior, revenues slightly dropped by 4.1%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
Novartis AG, through its subsidiaries, engages in the research, development, manufacture, and marketing of healthcare products worldwide. The company has a P/E ratio of 16, below the average drugs industry P/E ratio of 17.1 and below the S&P 500 P/E ratio of 17.7. Novartis has a market cap of $146.45 billion and is part of the
industry. Shares are up 5.9% year to date as of the close of trading on Friday.
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--Written by a member of TheStreet Ratings Staff.
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