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, 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 came in higher than the industry average of 4.3%. 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 -43.36%.
- 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.
- Compared to its closing price of one year ago, WPI's share price has jumped by 29.56%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- 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 ($5.77 versus $2.07).
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. Watson has a market cap of $11.24 billion and is part of the health care sector and drugs industry. The company has a P/E ratio of 27.3, above the S&P 500 P/E ratio of 17.7. Shares are up 45.6% year to date as of the close of trading on Thursday.
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--Written by a member of TheStreet Ratings Staff.
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