NEW YORK ( TheStreet Ratings) -- Every trading day TheStreet Ratings' stock model reviews the investment ratings on around 4,900 U.S. traded stocks for potential upgrades or downgrades based on the latest available financial results and trading activity.
TheStreet Ratings released rating changes on 164 U.S. common stocks for week ending August 12, 2011. 35 stocks were upgraded and 129 stocks were downgraded by our stock model.
Rating Change #10
Rackspace Hosting (RAX) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.Highlights from the ratings report include:
- RAX's revenue growth has slightly outpaced the industry average of 26.6%. Since the same quarter one year prior, revenues rose by 32.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RACKSPACE HOSTING INC reported significant earnings per share improvement 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. During the past fiscal year, RACKSPACE HOSTING INC increased its bottom line by earning $0.34 versus $0.24 in the prior year. This year, the market expects an improvement in earnings ($0.52 versus $0.34).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 56.8% when compared to the same quarter one year prior, rising from $11.20 million to $17.56 million.
- The gross profit margin for RACKSPACE HOSTING INC is currently very high, coming in at 70.10%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RAX's net profit margin of 7.10% significantly trails the industry average.
- Net operating cash flow has significantly increased by 52.98% to $79.49 million when compared to the same quarter last year. Despite an increase in cash flow, RACKSPACE HOSTING INC's average is still marginally south of the industry average growth rate of 60.81%.