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) -- Endo Health Solutions (Nasdaq: ENDP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
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- Net operating cash flow has significantly increased by 54.00% to $436.75 million when compared to the same quarter last year. In addition, ENDO HEALTH SOLUTIONS INC has also vastly surpassed the industry average cash flow growth rate of -29.03%.
- The gross profit margin for ENDO HEALTH SOLUTIONS INC is currently very high, coming in at 70.70%. Regardless of ENDP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ENDP's net profit margin of -89.41% significantly underperformed when compared to the industry average.
- The debt-to-equity ratio is very high at 2.83 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, ENDP maintains a poor quick ratio of 0.72, which illustrates the inability to avoid short-term cash problems.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, ENDO HEALTH SOLUTIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff