NEW YORK (TheStreet) -- Shares of Healthcare Services Group Inc. (HCSG - Get Report) are falling -6.95% to $28.07 after it reported second quarter earnings per share of 20 cents, missing the average estimate of 22 cents per share of analysts surveyed by Reuters.
Revenues increased approximately 17% to $319.3 million from $273.6 million last year, though analysts expected revenues of $321.8 million.
TheStreet Ratings team rates HEALTHCARE SERVICES GROUP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate HEALTHCARE SERVICES GROUP (HCSG) a BUY. 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HCSG's revenue growth has slightly outpaced the industry average of 4.4%. Since the same quarter one year prior, revenues rose by 14.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- HCSG 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 2.63, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 464.43% to $18.32 million when compared to the same quarter last year. In addition, HEALTHCARE SERVICES GROUP has also vastly surpassed the industry average cash flow growth rate of 4.31%.
- HEALTHCARE SERVICES GROUP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, HEALTHCARE SERVICES GROUP increased its bottom line by earning $0.69 versus $0.66 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.69).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full analysis from the report here: HCSG Ratings Report