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"We rate ADT CORP (ADT) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins 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 9.3%. Since the same quarter one year prior, revenues slightly increased by 1.9%. 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 gross profit margin for ADT CORP is currently very high, coming in at 88.69%. 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 9.65% trails the industry average.
- ADT CORP's earnings per share declined by 9.6% 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, ADT CORP increased its bottom line by earning $1.88 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($1.96 versus $1.88).
- 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. When compared to other companies in the Commercial Services & Supplies industry and the overall market, ADT CORP's return on equity is below that of both the industry average and the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, ADT has underperformed the S&P 500 Index, declining 13.12% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full analysis from the report here: ADT Ratings Report