Rating Change #9
Pepco Holdings (POM) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 274.1% when compared to the same quarter one year prior, rising from -$54.00 million to $94.00 million.
- PEPCO HOLDINGS INC has improved earnings per share by 23.5% in the most recent quarter compared to 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, PEPCO HOLDINGS INC reported lower earnings of $0.62 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.25 versus $0.62).
- POM, with its decline in revenue, underperformed when compared the industry average of 11.8%. Since the same quarter one year prior, revenues fell by 13.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- After a year of stock price fluctuations, the net result is that POM's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- The gross profit margin for PEPCO HOLDINGS INC is rather low; currently it is at 19.00%. Regardless of POM's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.70% trails the industry average.
Pepco Holdings, Inc., through its subsidiaries, engages in the transmission, distribution, and supply of electricity. The company also distributes and supplies natural gas. The company has a P/E ratio of 22.4, above the average utilities industry P/E ratio of 20.4 and above the S&P 500 P/E ratio of 17.7. Pepco has a market cap of $4.3 billion and is part of the utilities sector and utilities industry. Shares are up 1% year to date as of the close of trading on Monday.You can view the full Pepco Ratings Report or get investment ideas from our investment research center.
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