NEW YORK (TheStreet) --Shares of ABB (ABB) were gaining 4.7% to $23.40 on heavy trading volume Thursday following a report that activist investor Cervian Capital has taken a stake in the Swiss engineering company.
Cervian now holds a stake of more than 3% in ABB, according to Reuters. "We think ABB is a good company where we see a large value potential," Cervian Capital manage partner Christer Gardell told the news service.
On its website ABB said, "We welcome Cevian Capital II GP Limited investment in ABB and, as with all shareholders, appreciate the engagement and input."
News of the activist investor's stake comes a day after ABB won an order to supply the power infrastructure for a 400 MW wind farm off the coast of the U.K.
About 2.7 million shares of ABB were traded by 10:35 a.m. Thursday, above the company's average trading volume of about 1.6 million shares a day.
TheStreet Ratings team rates ABB LTD as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate ABB LTD (ABB) a BUY. This is driven by a few notable 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, reasonable valuation levels, good cash flow from operations, notable return on equity and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.49, 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 1.14, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 217.77% to $53.00 million when compared to the same quarter last year. In addition, ABB LTD has also vastly surpassed the industry average cash flow growth rate of -11.34%.
- 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. Compared to other companies in the Electrical Equipment industry and the overall market on the basis of return on equity, ABB LTD has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.7%. Since the same quarter one year prior, revenues slightly dropped by 9.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: ABB Ratings Report