NEW YORK ( TheStreet) -- Simcere Pharmaceutical Group (NYSE: SCR) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.
  • SIMCERE PHARMACTCL GRP -ADR's earnings per share declined by 28.6% in the most recent quarter compared to 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, SIMCERE PHARMACTCL GRP -ADR increased its bottom line by earning $0.46 versus $0.05 in the prior year. This year, the market expects an improvement in earnings ($0.52 versus $0.46).
  • The share price of SIMCERE PHARMACTCL GRP -ADR has not done very well: it is down 18.61% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 33.2% when compared to the same quarter one year ago, falling from $8.29 million to $5.54 million.

Simcere Pharmaceutical Group develops, manufactures, and markets branded generic and proprietary pharmaceuticals in China. The company has a P/E ratio of 18.2, above the average drugs industry P/E ratio of 14.6 and above the S&P 500 P/E ratio of 17.7. Simcere Pharmaceutical Group has a market cap of $465.6 million and is part of the health care sector and drugs industry. Shares are down 25.2% year to date as of the close of trading on Tuesday.

You can view the full Simcere Pharmaceutical Group Ratings Report or get investment ideas from our investment research center.
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