NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. Among the primary strengths of the company is its revenue growth. At the same time, however, we also find weaknesses including poor profit margins and a generally disappointing performance in the stock itself.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 24.3%. Since the same quarter one year prior, revenues slightly increased by 2.8%. 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' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, FEDERATED INVESTORS INC reported lower earnings of $1.46 versus $1.71 in the prior year. This year, the market expects an improvement in earnings ($1.64 versus $1.46).
- The change in net income from the same quarter one year ago has significantly exceeded that of the Capital Markets industry average, but is less than that of the S&P 500. The net income has decreased by 4.7% when compared to the same quarter one year ago, dropping from $42.41 million to $40.41 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, FII has underperformed the S&P 500 Index, declining 8.96% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The gross profit margin for FEDERATED INVESTORS INC is currently lower than what is desirable, coming in at 29.70%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 17.40% is above that of the industry average.
Federated Investors, Inc. is a publicly owned asset management holding company. The company has a P/E ratio of 13.6, above the average financial services industry P/E ratio of 12.7 and below the S&P 500 P/E ratio of 17.7. Federated Investors has a market cap of $2.06 billion and is part of the
industry. Shares are up 31.6% year to date as of the close of trading on Friday.
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-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.