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, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and expanding profit margins. 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 1.4%. 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 $889.76 million or 28.53% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.18%.
- Although SAP's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.94 is somewhat weak and could be cause for future problems.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite 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.
- The gross profit margin for SAP AG is currently very high, coming in at 73.70%. Regardless of SAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 15.70% trails the industry average.
SAP AG provides enterprise application software and software-related services worldwide. Sap AG ADR has a market cap of $87.6 billion and is part of the technology sector and computer software & services industry. The company has a P/E ratio of 19.6, above the S&P 500 P/E ratio of 17.7. Shares are up 40.4% 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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