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 A- . The company's strengths can be seen in multiple areas, such as its solid stock price performance, reasonable valuation levels, good cash flow from operations, growth in earnings per share and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass

Highlights from the ratings report include:
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.44% over the past year, a rise that has exceeded that of the S&P 500 Index. 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.
  • Net operating cash flow has increased to $788.00 million or 37.52% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.33%.
  • COVIDIEN PLC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, COVIDIEN PLC increased its bottom line by earning $3.92 versus $3.78 in the prior year. This year, the market expects an improvement in earnings ($4.43 versus $3.92).
  • The gross profit margin for COVIDIEN PLC is rather high; currently it is at 61.70%. Regardless of COV'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 15.36% trails the industry average.

Covidien plc develops, manufactures, and sells healthcare products for use in clinical and home settings worldwide. Covidien has a market cap of $28.42 billion and is part of the health care sector and health services industry. The company has a P/E ratio of 15.3, below the S&P 500 P/E ratio of 17.7. Shares are up 4.4% year to date as of the close of trading on Thursday.

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.

It's Official: Action Alerts PLUS beats the S&P 500 with Dividends Reinvested! Cramer and Link were up 16.72% in 2012. Were you? See what they are trading for 14-days FREE
null

If you liked this article you might like

Jim Cramer -- Deal Activity in Specialty Pharma Reaches a Frenzied Pace

Mallinckrodt Buys Ikaria in $2.3 Billion Hospital Treatment Deal

Stryker and Smith & Nephew Are the Stars to Watch in Medtech's 2015 Merger Dance

Medtronic Avoids U.S. Taxes While Saddling Shareholders With a Hefty Tax Bill

Trim Positions in Stryker Ahead of Fourth-Quarter Earnings; Buy on Pullback