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) -- Precision Castparts (NYSE: PCP) 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, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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- The revenue growth came in higher than the industry average of 3.3%. Since the same quarter one year prior, revenues rose by 13.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.21, which illustrates the ability to avoid short-term cash problems.
- PRECISION CASTPARTS CORP has improved earnings per share by 8.9% in the most recent quarter compared to the same quarter a year ago. 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, PRECISION CASTPARTS CORP increased its bottom line by earning $8.45 versus $7.02 in the prior year. This year, the market expects an improvement in earnings ($9.70 versus $8.45).
- Net operating cash flow has increased to $392.30 million or 28.87% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.01%.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
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