Aetna Inc Stock Buy Recommendation Reiterated (AET)

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) -- Aetna (NYSE: AET) 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 revenue growth, attractive valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 17.6%. Since the same quarter one year prior, revenues rose by 15.8%. 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.
  • Net operating cash flow has increased to $544.80 million or 10.28% when compared to the same quarter last year. Despite an increase in cash flow of 10.28%, AETNA INC is still growing at a significantly lower rate than the industry average of 1025.16%.
  • The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.80 is somewhat weak and could be cause for future problems.
  • AETNA INC's earnings per share declined by 45.1% in the most recent quarter compared to the same quarter a year ago. 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, AETNA INC reported lower earnings of $4.78 versus $5.21 in the prior year. This year, the market expects an improvement in earnings ($5.50 versus $4.78).

Aetna Inc. operates as a diversified health care benefits company in the United States. The company operates in three segments: Health Care, Group Insurance, and Large Case Pensions. Aetna has a market cap of $15.59 billion and is part of the health care sector and health services industry. The company has a P/E ratio of 9.9, below the S&P 500 P/E ratio of 17.7. Shares are up 2.6% year to date as of the close of trading on Thursday.

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

--Written by a member of TheStreet Ratings Staff.

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