TSC Ratings TheStreet.com Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.
Each business day, we compile a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- and publish these lists in the Ratings section of our website. Today, fast-growth stocks are in the spotlight.
These are stocks of companies that are projected to increase revenue and profit by at least 12% in the coming year and rank near the top all stocks rated by our proprietary quantitative model, which looks at over 60 factors.
In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. Please note that definitions of revenue vary by industry, and this screen does not make adjustments for acquisitions, which can materially affect posted results. Likewise, earnings-per-share growth may be affected by accounting charges, share repurchases and other one-time items.
Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.
business management software helps companies manage complex, changing business processes by automating decision-making and the implementation of those decisions. We have rated the company a
since May 2008. This rating is based on the company's growth, solvency, and expanding profit margins.
For the fourth quarter of fiscal 2008, the company reported revenue growth of 26.9% year over year. Continuing an impressive record of EPS growth, Pegasystems' EPS improved significantly, rising from 3 cents to 8 cents per share. Net income also increased in the fourth quarter, surging 99.6% from $1.42 million to $2.83 million. Both revenue and net income growth exceeded the averages for the Software industry. Pegasystems' gross profit margin is rather high at 64.8%; it has increased from the same quarter a year ago. The company has no debt to speak of, and its resulting debt-to-equity of zero can be seen as a favorable sign. In addition, Pegasystems maintains a quick ratio of 3.37, which clearly demonstrates its ability to cover short-term cash needs.
Management reported that the company's fourth quarter revenue was a record for the company. Pegasystems also achieved record new license signings for the quarter. Looking ahead to fiscal 2009, the company currently expects full-year revenue to top $250 million, while net income could surpass $17 million on a GAAP basis. The company's weak operating cash flow is a concern, but we feel that the strengths detailed above outweigh any potential weakness at this time.
The DirecTV Group
provides digital television entertainment in the United States and Latin America. We have rated the company a
since May 2006 due to the company's impressive revenue growth, expanding profit margins, increased cash balance, and notable return on equity.
For the fourth quarter of fiscal 2008, DirecTV's revenue increased 9.0% year-over-year, led by solid subscriber growth and continued ARPU growth in the United States. The company's EPS got a slight boost as a result, rising from 30 cents to 31 cents, despite a drop in net income. Gross profit margin also improved due to the company's revenue growth, expanding 57 basis points to 46.82%. Cash and cash equivalents jumped 82.6% to $2.01 billion, while net operating cash flow increased 8.8%. Return on equity also showed improvement, increasing 847 basis points to 31.22% due to a lower equity base.
Management was pleased with the fourth quarter and full year results, noting that the company achieved its best quarterly net subscriber growth in over three years in the U.S. segment. While the company remains focused on obtaining new subscribers, it faces challenges from lower earnings, decreasing return on assets, and rising debt levels, which could affect financial performance and our rating in the future.
develops and markets healthcare information systems that automate medical and dental practices, networks of practices such as physician hospital organizations, ambulatory care centers, community health centers, and medical and dental schools. We have rated Quality Systems a
since November 2001 due to its efficiency, solvency, and growth in revenue, net income, and EPS. Solid stock price performance also supports this rating.
For the third quarter of fiscal 2009, the company reported that its revenues rose 36.1% year over year. The company announced that its net revenue results were a record for the company. A 15.0% improvement in EPS implies that the revenue growth trickled down to the bottom line. The company has achieved positive EPS growth routinely over the past two years, and we feel that this trend should continue. Net income also increased in the third quarter, rising 17.3% from $11.21 million to $13.15 million. Quality Systems has no debt to speak of, giving it a debt-to-equity ratio of zero. We consider this a favorable sign, as is a quick ratio of 2.02, which demonstrates the company's ability to cover its short-term liquidity needs.
Quality Systems' stock has risen over the past year, reflecting the earnings growth and other positive factors like the ones cited above. Although this increase has driven to the stock to a level that is somewhat expensive to the rest of the Software industry, we feel that the company's strengths justify the higher price level at this time.
provides integrated information management solutions and services for local governments in the United States, Canada, Puerto Rico, and the United Kingdom. It has been rated a
since July 2005 because of its efficiency, solvency, expanding profit margins, and growth in net income and revenue.
For the first quarter of fiscal 2008, Tyler reported revenue growth of 17.2% year over year. This was higher than the industry average of 8.9%, and appears to have helped boost EPS, which improved from 8 cents to 16 cents per share. Net income increased 92.1%, rising from $3.13 million to $6.01 million. The company has a strong gross profit margin of 45.90%, which has increased from the same quarter last year. Tyler's return on equity can also be considered a modest strength, as it has improved slightly from 13.73% to 15.61%. In addition, a very low debt-to-equity ratio of 0.07 implies that the company has managed its debt levels very successfully.
Management was pleased with Tyler's strong start to fiscal 2009, but did not make any changes to its previously announced 2009 guidance because of the current economic climate. Although the company shows weak operating cash flow, we feel that the strengths detailed above outweigh any potential weakness at this time.
provides a variety of cost containment and payment accuracy services relating to government healthcare programs. We have rated this stock a
since September 2004 on the basis of such strengths as the company's largely solid financial position, good cash flow from operations, and growth in revenue, net income, and EPS.
HMS Holdings reported the results for its first quarter of fiscal 2009 on May 1. We will update our rating for this stock once the numbers are finalized in our model, but keep in mind that the current rating is based on the fourth quarter of fiscal 2008. The company reported that its earnings surged 74.9% year over year on higher revenue in the fourth quarter. Net income rose from $4.04 million in the fourth quarter of fiscal 2007 to $7.06 million in the most recent quarter. Revenue increased 25.8% year-over-year, greatly exceeding the industry average of 7.0%. This increase, led by strong revenue growth in each of the government healthcare program markets, appears to have helped boost EPS, which showed significant improvement over the same quarter a year ago, rising from 15 cents to 26 cents per share. HMS Holdings has a very low debt-to-equity ratio of 0.10, which implies that it has successfully managed its debt levels. In addition, a quick ratio of 3.24 clearly demonstrates an ability to cover short-term cash needs. Finally, net operating cash flow increased 17.50% when compared to the same quarter of last year.
Having had a record year in terms of revenue growth and profitability, the company expects to see strong results continue into the next fiscal year. Looking ahead to fiscal 2009, HMS Holdings raised its earnings outlook to $1 per share from previous guidance of 96 cents per share. The company is currently trading at a premium valuation, but we feel that the strengths detailed above justify the higher price at this time.
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Our quantitative rating, which can be viewed for any stock through our stock screener stock rating screener, is based on a variety of historical fundamental and pricing data and represents our opinion of a stock's risk-adjusted performance relative to other stocks. However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.For those reasons, we believe that a rating alone cannot tell the whole story and that it should be part of an investor's overall research.