NEW YORK (
) 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, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 23.6%. Since the same quarter one year prior, revenues rose by 41.7%. 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.
- ELNK's debt-to-equity ratio of 0.87 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. Despite the fact that ELNK's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.56 is high and demonstrates strong liquidity.
- The gross profit margin for EARTHLINK INC is rather high; currently it is at 53.70%. Regardless of ELNK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ELNK's net profit margin of 2.10% is significantly lower than the same period one year prior.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market, EARTHLINK INC's return on equity significantly trails that of both the industry average and the S&P 500.
EarthLink, Inc., together with its subsidiaries, provides network, communications, and IT services to business and residential customers in the United States. The company operates in two reportable segments, Business Services and Consumer Services. The company has a P/E ratio of 24.7, equal to the average internet industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Earthlink has a market cap of $842.4 million and is part of the
industry. Shares are up 22.8% year to date as of the close of trading on Friday.
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-- Written by a member of TheStreet RatingsStaff