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 A- . The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. 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:
- The revenue growth greatly exceeded the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 33.6%. 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.
- Net operating cash flow has increased to $893.62 million or 29.08% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.24%.
- 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 AG's earnings per share declined by 48.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SAP AG increased its bottom line by earning $3.75 versus $2.03 in the prior year. For the next year, the market is expecting a contraction of 16.3% in earnings ($3.14 versus $3.75).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 48.2% when compared to the same quarter one year ago, falling from $1,576.14 million to $816.54 million.
SAP AG provides enterprise application software and software-related services worldwide. Sap AG ADR has a market cap of $85.22 billion and is part of the technology sector and computer software & services industry. The company has a P/E ratio of 19.1, above the S&P 500 P/E ratio of 17.7. Shares are up 35.2% year to date as of the close of trading on Tuesday.
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--Written by a member of TheStreet Ratings Staff.
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