Rating Change #5
VeriFone Systems Inc (PAY) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including premium valuation and disappointing return on equity.
Highlights from the ratings report include:
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to other companies in the IT Services industry and the overall market on the basis of return on equity, VERIFONE SYSTEMS INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 135.22% over the past year, a rise that has exceeded that of the S&P 500 Index. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- VERIFONE SYSTEMS INC has improved earnings per share by 17.4% 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 two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, VERIFONE SYSTEMS INC turned its bottom line around by earning $1.11 versus -$1.86 in the prior year. This year, the market expects an improvement in earnings ($1.81 versus $1.11).
- PAY's revenue growth has slightly outpaced the industry average of 14.6%. Since the same quarter one year prior, revenues rose by 21.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
VeriFone Systems, Inc. designs, markets, and services electronic payment solutions that enable secure electronic payments among consumers, merchants, and financial institutions worldwide. The company has a P/E ratio of 34.1, below the average consumer durables industry P/E ratio of 34.4 and above the S&P 500 P/E ratio of 17.7. VeriFone Systems has a market cap of $4.1 billion and is part of the consumer goods sector and consumer durables industry. Shares are up 22.3% year to date as of the close of trading on Friday.You can view the full VeriFone Systems Ratings Report or get investment ideas from our investment research center.
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