NEW YORK (

TheStreet

)

-- GeoEye Inc

(Nasdaq:

GEOY

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

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 320.9% when compared to the same quarter one year prior, rising from -$6.38 million to $14.09 million.
  • GEOEYE INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GEOEYE INC reported lower earnings of $0.97 versus $1.53 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus $0.97).
  • The gross profit margin for GEOEYE INC is rather high; currently it is at 66.80%. Regardless of GEOY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GEOY's net profit margin of 16.40% compares favorably to the industry average.
  • The debt-to-equity ratio of 1.04 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, GEOY has managed to keep a strong quick ratio of 2.40, which demonstrates the ability to cover short-term cash needs.
  • GEOY's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 49.90%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

GeoEye, Inc., together with its subsidiaries, provides earth imagery and imagery information products, as well as image processing services to the United States and foreign government defense and intelligence organizations, domestic federal and foreign civil agencies, and commercial customers. The company has a P/E ratio of 9.2, below the average computer software & services industry P/E ratio of 10 and below the S&P 500 P/E ratio of 17.7. GeoEye has a market cap of $479.2 million and is part of the

technology

sector and

computer software & services

industry. Shares are down 52.8% year to date as of the close of trading on Friday.

You can view the full

GeoEye Ratings Report

or get investment ideas from our

investment research center

.

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