How Will This Analyst Downgrade Affect Express Scripts (ESRX) Stock Today?

NEW YORK (TheStreet) -- Express Scripts Holding Co. (ESRX) was downgraded to "neutral" from "buy" at Goldman Sachs (GS) as the firm maintains its $75 price target on the pharmacy benefits manager.

"We think valuation adequately reflects a business supported by maturing growth drivers. Furthermore, scale/synergy-driven M&A growth is less obvious going forward," the firm said.

Shares of Express Scripts Holding closed up at $75.05 yesterday.

 

TheStreet Ratings team rates EXPRESS SCRIPTS HOLDING CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate EXPRESS SCRIPTS HOLDING CO (ESRX) 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 good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, notable return on equity and increase in stock price during the past year. 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:

  • Net operating cash flow has significantly increased by 576.97% to $735.50 million when compared to the same quarter last year. In addition, EXPRESS SCRIPTS HOLDING CO has also vastly surpassed the industry average cash flow growth rate of 10.50%.
  • EXPRESS SCRIPTS HOLDING CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, EXPRESS SCRIPTS HOLDING CO increased its bottom line by earning $2.31 versus $1.85 in the prior year. This year, the market expects an improvement in earnings ($4.88 versus $2.31).
  • The debt-to-equity ratio is somewhat low, currently at 0.79, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that ESRX's debt-to-equity ratio is low, the quick ratio, which is currently 0.50, displays a potential problem in covering short-term cash needs.
  • ESRX, with its decline in revenue, underperformed when compared the industry average of 20.7%. Since the same quarter one year prior, revenues slightly dropped by 4.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • You can view the full analysis from the report here: ESRX Ratings Report
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