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 A- . The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 3.8%. Since the same quarter one year prior, revenues rose by 18.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- WATSON PHARMACEUTICALS INC has improved earnings per share by 11.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. 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 ($5.94 versus $2.07).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Pharmaceuticals industry average. The net income increased by 12.6% when compared to the same quarter one year prior, going from $68.10 million to $76.70 million.
- Net operating cash flow has increased to $145.90 million or 23.22% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -14.82%.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.43% over the past year, a rise that has exceeded that of the S&P 500 Index. 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., 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 $11.28 billion and is part of the health care sector and drugs industry. The company has a P/E ratio of 68.4, above the S&P 500 P/E ratio of 17.7. Shares are up 46.3% year to date as of the close of trading on Wednesday.
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--Written by a member of TheStreet Ratings Staff.
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