Thoratec Corp Stock Downgraded (THOR)

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) -- Thoratec (Nasdaq: THOR) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and unimpressive growth in net income.

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Highlights from the ratings report include:
  • THOR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.38, which clearly demonstrates the ability to cover short-term cash needs.
  • THORATEC CORP's earnings per share declined by 25.0% 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, THORATEC CORP increased its bottom line by earning $1.26 versus $0.94 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.26).
  • The gross profit margin for THORATEC CORP is currently very high, coming in at 70.94%. Regardless of THOR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, THOR's net profit margin of 14.74% compares favorably to the industry average.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, THOR has underperformed the S&P 500 Index, declining 8.49% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Health Care Equipment & Supplies industry. The net income has decreased by 24.9% when compared to the same quarter one year ago, dropping from $23.19 million to $17.41 million.

Thoratec Corporation develops, manufactures, and markets proprietary medical devices used for mechanical circulatory support for the treatment of heart failure patients. Thoratec has a market cap of $1.85 billion and is part of the health care sector and health services industry. Shares are down 37.9% year to date as of the close of trading on Friday.

You can view the full Thoratec Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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