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 revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 16.8%. Since the same quarter one year prior, revenues rose by 12.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- GWW's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.31, which illustrates the ability to avoid short-term cash problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Trading Companies & Distributors industry and the overall market, GRAINGER (W W) INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 45.10% is the gross profit margin for GRAINGER (W W) INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.50% is above that of the industry average.
- 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 47.75% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GWW should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
W.W. Grainger, Inc. engages in the distribution of maintenance, repair, and operating supplies, as well as other related products and services for businesses and institutions primarily in the United States and Canada. The company has a P/E ratio of 21, equal to the average wholesale industry P/E ratio and above the S&P 500 P/E ratio of 17.7. W.W. Grainger has a market cap of $14.29 billion and is part of the
industry. Shares are up 10.2% year to date as of the close of trading on Monday.
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--Written by a member of TheStreet Ratings Staff.