NEW YORK (
-- Federated Investors
) has been downgraded by TheStreet Ratings from buy to hold. 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 and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and poor profit margins.
Highlights from the ratings report include:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Capital Markets industry. The net income has decreased by 20.9% when compared to the same quarter one year ago, dropping from $42.01 million to $33.23 million.
- FEDERATED INVESTORS INC's earnings per share declined by 15.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, FEDERATED INVESTORS INC reported lower earnings of $1.71 versus $1.93 in the prior year. For the next year, the market is expecting a contraction of 5.3% in earnings ($1.62 versus $1.71).
- 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The debt-to-equity ratio is somewhat low, currently at 0.76, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, FII has a quick ratio of 2.03, which demonstrates the ability of the company to cover short-term liquidity needs.
- FII's revenue growth has slightly outpaced the industry average of 2.8%. Since the same quarter one year prior, revenues slightly increased by 2.5%. 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.
Federated Investors, Inc. is a publicly owned investment manager. The company has a P/E ratio of 15.6, equal to the average financial services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Federated Investors has a market cap of $2.7 billion and is part of the
industry. Shares are down 1.3% year to date as of the close of trading on Monday.
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