Tower Group Inc. Stock Downgraded (TWGP)

NEW YORK ( TheStreet) -- Tower Group (Nasdaq: TWGP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • TWGP's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 8.4%. 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.
  • Despite currently having a low debt-to-equity ratio of 0.41, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • Net operating cash flow has significantly decreased to -$25.61 million or 166.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Insurance industry and the overall market, TOWER GROUP INC's return on equity is below that of both the industry average and the S&P 500.
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Tower Group, Inc., through its subsidiaries, provides commercial, specialty, and personal property and casualty insurance products and services to businesses in various industries and to individuals in the United States. The company has a P/E ratio of 14.5, below the average insurance industry P/E ratio of 14.7 and below the S&P 500 P/E ratio of 17.7. Tower Group has a market cap of $851.8 million and is part of the financial sector and insurance industry. Shares are up 5.6% year to date as of the close of trading on Monday.

You can view the full Tower Group Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet Ratings Staff
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