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) -- McKesson (NYSE: MCK) 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 solid stock price performance, revenue growth, notable return on equity, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- 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, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- MCK's revenue growth trails the industry average of 16.5%. Since the same quarter one year prior, revenues slightly increased by 1.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, MCKESSON CORP's return on equity exceeds that of both the industry average and the S&P 500.
- MCKESSON CORP'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, MCKESSON CORP increased its bottom line by earning $5.60 versus $4.29 in the prior year. This year, the market expects an improvement in earnings ($7.20 versus $5.60).
- The current debt-to-equity ratio, 0.59, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that MCK's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.
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