Covidien PLC Stock Buy Recommendation Reiterated (COV)

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) -- Covidien (NYSE: COV) 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 revenue growth, solid stock price performance, attractive valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • COV's revenue growth has slightly outpaced the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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.
  • Compared to its closing price of one year ago, COV's share price has jumped by 39.97%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, COV should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for COVIDIEN PLC is rather high; currently it is at 63.20%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.10% trails the industry average.
  • Net operating cash flow has slightly increased to $721.00 million or 1.54% when compared to the same quarter last year. Despite an increase in cash flow, COVIDIEN PLC's cash flow growth rate is still lower than the industry average growth rate of 13.35%.

Covidien Public Limited Company develops, manufactures, and sells healthcare products for use in clinical and home settings in the United States and internationally. The company has a P/E ratio of 15.4, equal to the average health services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Covidien has a market cap of $28.7 billion and is part of the health care sector and health services industry. Shares are up 28.5% year to date as of the close of trading on Tuesday.

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

--Written by a member of TheStreet Ratings Staff.

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