Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- Actavis (NYSE: ACT) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk.
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- The revenue growth greatly exceeded the industry average of 3.7%. Since the same quarter one year prior, revenues rose by 46.8%. 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.
- Compared to its closing price of one year ago, ACT's share price has jumped by 70.42%, exceeding the performance of the broader market during that same time frame. Although ACT had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
- The gross profit margin for ACTAVIS PLC is rather high; currently it is at 50.35%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -28.38% is in-line with the industry average.
- Currently the debt-to-equity ratio of 1.80 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, ACT has a quick ratio of 0.67, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- 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, ACTAVIS PLC's return on equity significantly trails that of both the industry average and the S&P 500.