Will This Downgrade Hurt Fuller (FUL) Stock Today?

NEW YORK (TheStreet) -- Fuller (FUL) stock has been upgraded to "buy" from "hold" with a $54 price target, Deutsche Bank said Friday. The firm said the company can still achieve its margin targets. 

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Separately, TheStreet Ratings team rates FULLER (H. B.) CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate FULLER (H. B.) CO (FUL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.1%. Since the same quarter one year prior, revenues slightly increased by 1.3%. 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.
  • The current debt-to-equity ratio, 0.57, 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 1.25, which illustrates the ability to avoid short-term cash problems.
  • FULLER (H. B.) CO's earnings per share declined by 31.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FULLER (H. B.) CO increased its bottom line by earning $1.88 versus $1.34 in the prior year. This year, the market expects an improvement in earnings ($3.08 versus $1.88).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Chemicals industry and the overall market, FULLER (H. B.) CO's return on equity is significantly below that of the industry average and is below that of the S&P 500.
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