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, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The current debt-to-equity ratio, 0.31, 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 0.75 is somewhat weak and could be cause for future problems.
- The gross profit margin for NOVARTIS AG is rather high; currently it is at 66.90%. 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, the net profit margin of 17.70% trails the industry average.
- NOVARTIS AG reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, NOVARTIS AG reported lower earnings of $3.80 versus $4.26 in the prior year. This year, the market expects an improvement in earnings ($5.21 versus $3.80).
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