NEW YORK (

TheStreet

)

-- Archipelago Learning

(Nasdaq:

ARCL

) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 4.0%. Since the same quarter one year prior, revenues rose by 34.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ARCHIPELAGO LEARNING 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ARCHIPELAGO LEARNING INC increased its bottom line by earning $0.13 versus $0.06 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus $0.13).
  • ARCL's debt-to-equity ratio of 0.69 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.89 is weak.
  • The gross profit margin for ARCHIPELAGO LEARNING INC is currently lower than what is desirable, coming in at 32.90%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 9.80% trails that of the industry average.
  • ARCL has underperformed the S&P 500 Index, declining 20.11% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

Archipelago Learning, Inc. operates as a subscription-based, software-as-a-service provider of education products in the United States, Canada, and the United Kingdom. The company has a P/E ratio of 59.9, above the average diversified services industry P/E ratio of 52.8 and above the S&P 500 P/E ratio of 17.7. Archipelago Learning has a market cap of $236.5 million and is part of the

services

sector and

diversified services

industry. Shares are down 3.2% year to date as of the close of trading on Thursday.

You can view the full

Archipelago Learning Ratings Report

or get investment ideas from our

investment research center

.

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