NEW YORK ( TheStreet) -- WuXi PharmaTech (Cayman (NYSE: WX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 24.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • WX's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, WX has a quick ratio of 2.21, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 38.20% is the gross profit margin for WUXI PHARMATECH (CAYMAN)-ADR which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, WX's net profit margin of 18.40% compares favorably to the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Life Sciences Tools & Services industry average, but is greater than that of the S&P 500. The net income increased by 35.5% when compared to the same quarter one year prior, rising from $13.76 million to $18.65 million.
  • WX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 31.87%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

Wuxi PharmaTech (Cayman) Inc., through its subsidiaries, operates as a pharmaceutical, biotechnology, and medical device research and development outsourcing company primarily in the People's Republic of China and the United States. The company has a P/E ratio of 8.9, equal to the average drugs industry P/E ratio and below the S&P 500 P/E ratio of 17.7. WuXi PharmaTech (Cayman has a market cap of $817.2 million and is part of the health care sector and drugs industry. Shares are down 28.1% year to date as of the close of trading on Wednesday.

You can view the full WuXi PharmaTech (Cayman Ratings Report or get investment ideas from our investment research center.
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