TSC Ratings' Updates: Sina

We've upgraded Epiq Systems(EPIQ Quote), which provides integrated technology solutions for legal profession in the U.S., from hold to buy, driven by its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, impressive record of earnings per share growth and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Revenue rose by 31.3% since the same quarter last year, outpacing the industry average of 7.1% growth and boosting EPS. Although Epiq's debt-to-equity ratio of 0.20 is very low, it is currently higher than that of the industry average, and its quick ratio of 2.07 demonstrates the ability of the company to cover short-term liquidity needs. Net income growth of 64.8% from the same quarter one year ago has significantly exceeded that of the S&P 500 and the software industry.

Epiq has improved earnings per share by 42.9% in the most recent quarter compared with 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, it reported lower earnings of 21 cents vs. $1.01 in the prior year. This year, the market expects an improvement in earnings to 59 cents. Epiq's gross profit margin is rather high at 53.4%, but it has decreased significantly from the same period last year. The company's net profit margin of 6.8% is significantly lower than it was in the same period last year.