Novartis AG Stock Buy Recommendation Reiterated (NVS)

Editor's Note: 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.

NEW YORK ( TheStreet) -- Novartis (NYSE: NVS) has been reiterated by TheStreet Ratings as a buy with a ratings score of A+ . The company's strengths can be seen in multiple areas, such as its attractive valuation levels, largely solid financial position with reasonable debt levels by most measures, increase in net income, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that NVS's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.
  • The net income growth from the same quarter one year ago has exceeded that of the Pharmaceuticals industry average, but is less than that of the S&P 500. The net income increased by 0.1% when compared to the same quarter one year prior, going from $2,704.00 million to $2,706.00 million.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.9%. Since the same quarter one year prior, revenues slightly dropped by 4.1%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • The gross profit margin for NOVARTIS AG is rather high; currently it is at 67.80%. Regardless of NVS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NVS's net profit margin of 18.90% compares favorably to the industry average.

Novartis AG, through its subsidiaries, engages in the research, development, manufacture, and marketing of healthcare products worldwide. The company has a P/E ratio of 15.6, below the average drugs industry P/E ratio of 16.6 and below the S&P 500 P/E ratio of 17.7. Novartis has a market cap of $142.73 billion and is part of the health care sector and drugs industry. Shares are up 3.3% year to date as of the close of trading on Thursday.

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

--Written by a member of TheStreet Ratings Staff.

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