NEW YORK ( TheStreet) -- Honda Motor (NYSE: HMC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The debt-to-equity ratio is somewhat low, currently at 0.90, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.84 is somewhat weak and could be cause for future problems.
- HMC, with its decline in revenue, underperformed when compared the industry average of 6.2%. Since the same quarter one year prior, revenues slightly dropped by 6.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- HONDA MOTOR CO LTD's earnings per share declined by 44.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, HONDA MOTOR CO LTD increased its bottom line by earning $3.56 versus $1.58 in the prior year. For the next year, the market is expecting a contraction of 61.1% in earnings ($1.39 versus $3.56).
- In its most recent trading session, HMC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
-- Written by a member of TheStreet RatingsStaff