TSC Ratings' Updates: Netflix

We've upgraded Corinthian Colleges (COCO Quote), which operates as a post-secondary education company in the United States and Canada, from hold to buy. This upgrade is driven by robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Corinthian Colleges' revenue growth has slightly outpaced the industry average of 14.7%. Since the same quarter one year prior, revenues rose by 18.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

The company's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.

It has improved earnings per share by 40.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, Corinthian Colleges increased its bottom line by earning $0.39 versus $0.20 in the prior year. This year, the market expects an improvement in earnings ($0.59 versus $0.39).

Net operating cash flow has significantly increased by 2834.84% to $27.70 million when compared to the same quarter last year. In addition, Corinthian Colleges has also vastly surpassed the industry average cash flow growth rate of 33.14%.

The company's gross profit margin is 43.40%, which we consider to be strong. Regardless of Corinthian Colleges' high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the company's net profit margin of 1.90% is significantly lower than the same period one year prior.