NEW YORK ( TheStreet) -- Watson Pharmaceuticals (NYSE: WPI) has been reiterated by TheStreet Ratings as a buy with a ratings score of B. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
- ACTIVE STOCK TRADERS: Check out TheStreet's special offer for Real Money, headlined by Jim Cramer, now!
- WPI's very impressive revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues leaped by 75.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- WATSON PHARMACEUTICALS INC has improved earnings per share by 19.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, WATSON PHARMACEUTICALS INC increased its bottom line by earning $2.07 versus $1.50 in the prior year. This year, the market expects an improvement in earnings ($5.76 versus $2.07).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Pharmaceuticals industry average. The net income increased by 21.0% when compared to the same quarter one year prior, going from $45.30 million to $54.80 million.
- The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.77 is somewhat weak and could be cause for future problems.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
--Written by a member of TheStreet Ratings Staff.TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.