NEW YORK (
-- Tower Group
) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Highlights from the ratings report include:
- TWGP's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 8.4%. 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.
- Despite currently having a low debt-to-equity ratio of 0.41, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
- TOWER GROUP INC's earnings per share declined by 23.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TOWER GROUP INC reported lower earnings of $1.46 versus $2.41 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $1.46).
- The change in net income from the same quarter one year ago has exceeded that of the Insurance industry average, but is less than that of the S&P 500. The net income has significantly decreased by 26.8% when compared to the same quarter one year ago, falling from $36.63 million to $26.83 million.
Tower Group, Inc., through its subsidiaries, provides a range of commercial, personal, and specialty property and casualty insurance products and services to businesses in various industries and to individuals in the United States. The company has a P/E ratio of 11.9, below the average insurance industry P/E ratio of 12.6 and below the S&P 500 P/E ratio of 17.7. Tower Group has a market cap of $854.6 million and is part of the
industry. Shares are up 16.4% year to date as of the close of trading on Tuesday.
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-- Written by a member of TheStreet RatingsStaff