NEW YORK ( TheStreet) -- Valeant Pharmaceuticals International (NYSE: VRX) 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, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's net income has been quite unimpressive. Highlights from the ratings report include:
- VRX's very impressive revenue growth greatly exceeded the industry average of 5.2%. Since the same quarter one year prior, revenues leaped by 51.5%. 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.
- Net operating cash flow has significantly increased by 93.82% to $167.33 million when compared to the same quarter last year. In addition, VALEANT PHARMACEUTICALS INTL has also vastly surpassed the industry average cash flow growth rate of -50.41%.
- 40.10% is the gross profit margin for VALEANT PHARMACEUTICALS INTL 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, VRX's net profit margin of -1.50% significantly underperformed when compared to 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. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- 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 299.3% when compared to the same quarter one year ago, falling from $6.48 million to -$12.92 million.
-- Written by a member of TheStreet Ratings Staff