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, good cash flow from operations, 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:
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.7%. Since the same quarter one year prior, revenues slightly increased by 7.9%. 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.
- GWW's debt-to-equity ratio is very low at 0.19 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 1.33, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $337.89 million or 34.88% when compared to the same quarter last year. In addition, GRAINGER (W W) INC has also modestly surpassed the industry average cash flow growth rate of 32.31%.
- 45.30% 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. Regardless of the strong results of the gross profit margin, the net profit margin of 6.80% trails the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen 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. W.W. Grainger has a market cap of $13.86 billion and is part of the services sector and wholesale industry. The company has a P/E ratio of 22.5, above the S&P 500 P/E ratio of 17.7. Shares are up 6.5% 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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