Honda Motor Co Ltd Stock Upgraded (HMC)

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) -- Honda Motor (NYSE: HMC) 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, impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 21.9%. Since the same quarter one year prior, revenues rose by 41.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • HONDA MOTOR CO LTD reported significant earnings per share improvement 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, HONDA MOTOR CO LTD increased its bottom line by earning $3.10 versus $2.17 in the prior year. This year, the market expects an improvement in earnings ($3.53 versus $3.10).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Automobiles industry. The net income increased by 224.7% when compared to the same quarter one year prior, rising from $535.90 million to $1,740.27 million.
  • Net operating cash flow has increased to $3,665.46 million or 41.38% when compared to the same quarter last year. Despite an increase in cash flow, HONDA MOTOR CO LTD's average is still marginally south of the industry average growth rate of 41.86%.
  • The debt-to-equity ratio is somewhat low, currently at 0.99, 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 0.81 is somewhat weak and could be cause for future problems.

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