NEW YORK (TheStreet) -- Federated Investors (NYSE:FII) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins. 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 Capital Markets industry. The net income increased by 27.4% when compared to the same quarter one year prior, rising from $33.23 million to $42.33 million.
- The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, FII has a quick ratio of 2.14, which demonstrates the ability of the company to cover short-term liquidity needs.
- FEDERATED INVESTORS INC has improved earnings per share by 28.1% 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, FEDERATED INVESTORS INC reported lower earnings of $1.46 versus $1.71 in the prior year. This year, the market expects an improvement in earnings ($1.68 versus $1.46).
- Despite the weak revenue results, FII has outperformed against the industry average of 23.0%. Since the same quarter one year prior, revenues slightly dropped by 3.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market, FEDERATED INVESTORS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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