ADT (ADT) Downgraded From Buy to Hold

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NEW YORK (TheStreet) -- ADT  (ADT) has been downgraded by TheStreet Ratings from Buy to Hold with a ratings score of C.  TheStreet Ratings Team has this to say about their recommendation:

"We rate ADT CORP (ADT) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and weak operating cash flow."

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 8.4%. Since the same quarter one year prior, revenues slightly increased by 4.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ADT CORP's earnings per share improvement from the most recent quarter was slightly positive. 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 reported lower earnings of $1.67 versus $1.88 in the prior year. This year, the market expects an improvement in earnings ($2.05 versus $1.67).
  • Currently the debt-to-equity ratio of 1.63 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.24, which clearly demonstrates the inability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness 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.
You can view the full analysis from the report here: ADT Ratings Report

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