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) -- Actavis (NYSE: ACT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- ACT's revenue growth has slightly outpaced the industry average of 6.1%. Since the same quarter one year prior, revenues rose by 13.3%. 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.
- 45.30% is the gross profit margin for ACTAVIS INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ACT's net profit margin of 1.59% significantly trails the industry average.
- Compared to its closing price of one year ago, ACT's share price has jumped by 37.87%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- ACTAVIS INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, ACTAVIS INC reported lower earnings of $0.75 versus $2.07 in the prior year. This year, the market expects an improvement in earnings ($8.04 versus $0.75).
- Net operating cash flow has declined marginally to $219.80 million or 0.90% when compared to the same quarter last year. Despite a decrease in cash flow ACTAVIS INC is still fairing well by exceeding its industry average cash flow growth rate of -13.50%.
-- Written by a member of TheStreet Ratings Staff