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 (
-- Sap AG ADR
) 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 notable return on equity, reasonable valuation levels, expanding profit margins, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Software industry and the overall market, SAP AG's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- The gross profit margin for SAP AG is currently very high, coming in at 74.50%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.10% significantly outperformed against the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- SAP, with its decline in revenue, underperformed when compared the industry average of 6.3%. Since the same quarter one year prior, revenues slightly dropped by 3.7%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
SAP AG provides business software primarily in Europe, the Middle East, Africa, the Americas, and the Asia Pacific Japan region. The company has a P/E ratio of 17.2, above the average computer software & services industry P/E ratio of 16.9 and below the S&P 500 P/E ratio of 17.7. Sap AG ADR has a market cap of $76.97 billion and is part of the
industry. Shares are up 22.4% year to date as of the close of trading on Friday.
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--Written by a member of TheStreet Ratings Staff.