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NEW YORK (TheStreet) -- Avago Technologies (AVGO) has been upgraded by TheStreet Ratings from Hold to Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate AVAGO TECHNOLOGIES LTD (AVGO) a BUY. This is driven by some important positives, 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 robust revenue growth, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AVGO's very impressive revenue growth greatly exceeded the industry average of 18.9%. Since the same quarter one year prior, revenues leaped by 118.2%. 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.
- Net operating cash flow has significantly increased by 82.29% to $381.00 million when compared to the same quarter last year. In addition, AVAGO TECHNOLOGIES LTD has also vastly surpassed the industry average cash flow growth rate of 11.90%.
- The gross profit margin for AVAGO TECHNOLOGIES LTD is rather high; currently it is at 61.12%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, AVGO's net profit margin of 8.38% significantly trails the industry average.
- Compared to its closing price of one year ago, AVGO's share price has jumped by 112.43%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
- AVAGO TECHNOLOGIES LTD's earnings per share declined by 26.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, AVAGO TECHNOLOGIES LTD reported lower earnings of $1.16 versus $2.19 in the prior year. This year, the market expects an improvement in earnings ($6.43 versus $1.16).
- You can view the full analysis from the report here: AVGO Ratings Report