Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK (TheStreet) -- Realpage (Nasdaq:RP) 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, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- The revenue growth came in higher than the industry average of 5.7%. Since the same quarter one year prior, revenues rose by 19.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- REALPAGE 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, REALPAGE INC turned its bottom line around by earning $0.07 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($0.59 versus $0.07).
- RP 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.97 is somewhat weak and could be cause for future problems.
- The gross profit margin for REALPAGE INC is rather high; currently it is at 64.14%. Regardless of RP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RP's net profit margin of 4.88% is significantly lower than the industry average.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
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