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 B . The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, expanding profit margins 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 5.9%. Since the same quarter one year prior, revenues rose by 25.3%. 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 significantly increased by 233.94% to $199.70 million when compared to the same quarter last year. In addition, WATSON PHARMACEUTICALS INC has also vastly surpassed the industry average cash flow growth rate of 1.30%.
- The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.72 is somewhat weak and could be cause for future problems.
- WATSON PHARMACEUTICALS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WATSON PHARMACEUTICALS INC increased its bottom line by earning $2.07 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($5.80 versus $2.07).
- 45.90% is the gross profit margin for WATSON PHARMACEUTICALS INC which we consider to be strong. Regardless of WPI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WPI's net profit margin of -4.60% significantly underperformed when compared to the industry average.
Watson Pharmaceuticals, Inc., a specialty pharmaceutical company, engages in the development, manufacture, marketing, sale, and distribution of generic and brand pharmaceutical products in the United States, western Europe, Canada, Australasia, Asia, South America, and South Africa. The company has a P/E ratio of 24.4, below the average drugs industry P/E ratio of 64.2 and above the S&P 500 P/E ratio of 17.7. Watson has a market cap of $10.08 billion and is part of the
industry. Shares are up 38.1% year to date as of the close of trading on Friday.
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--Written by a member of TheStreet Ratings Staff.