Editor's Note: 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. NEW YORK (TheStreet) -- AthenaHealth (Nasdaq:ATHN) 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, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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- The revenue growth came in higher than the industry average of 11.7%. Since the same quarter one year prior, revenues rose by 25.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ATHN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.84, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has increased to $24.03 million or 11.66% when compared to the same quarter last year. In addition, ATHENAHEALTH INC has also modestly surpassed the industry average cash flow growth rate of 3.37%.
- 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 41.50% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- ATHENAHEALTH INC has improved earnings per share by 6.7% 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, ATHENAHEALTH INC reported lower earnings of $0.51 versus $0.53 in the prior year. This year, the market expects an improvement in earnings ($1.22 versus $0.51).
-- Written by a member of TheStreet Ratings Staff
Editor's Note: 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. It's Official: Action Alerts PLUS beats the S&P 500 with Dividends Reinvested! Cramer and Link were up 16.72% in 2012. Were you? See what they are trading for 14-days FREE.
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