Monotype Imaging Holdings (NASDAQ: TYPE) is rated at BUY with a grade of A. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, growth in earnings per share and compelling growth in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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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 Software industry. The net income increased by 33.3% when compared to the same quarter one year prior, rising from $5.99 million to $7.99 million.
- MONOTYPE IMAGING HOLDINGS has improved earnings per share by 31.3% 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, MONOTYPE IMAGING HOLDINGS increased its bottom line by earning $0.61 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($1.04 versus $0.61).
- TYPE's debt-to-equity ratio is very low at 0.14 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 1.29, which illustrates the ability to avoid short-term cash problems.
- The revenue growth came in higher than the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 23.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
Monotype Imaging Holdings Inc., through its subsidiaries, provides end-user and embedded text imaging solutions and services for use in print, Web, and mobile environments that enable people to create and consume content on various devices.You can view the full Monotype Imaging Holdings Ratings Report or get investment ideas from our investment research center.