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"We rate TIMKEN CO (TKR) a BUY. This is driven by a number of strengths, 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 largely solid financial position with reasonable debt levels by most measures 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:
- The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.44, which illustrates the ability to avoid short-term cash problems.
- TIMKEN CO's earnings per share declined by 21.8% 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, TIMKEN CO reported lower earnings of $1.57 versus $2.01 in the prior year. This year, the market expects an improvement in earnings ($2.82 versus $1.57).
- TKR, with its decline in revenue, underperformed when compared the industry average of 1.2%. Since the same quarter one year prior, revenues fell by 28.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. In comparison to the other companies in the Machinery industry and the overall market, TIMKEN CO's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for TIMKEN CO is currently lower than what is desirable, coming in at 33.38%. Regardless of TKR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.49% trails the industry average.
- You can view the full analysis from the report here: TKR Ratings Report