Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link
NEW YORK (
-- HDFC Bank
) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, compelling growth in net income, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 11.6%. Since the same quarter one year prior, revenues rose by 17.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Commercial Banks industry and the overall market, HDFC BANK LTD's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 32.9% when compared to the same quarter one year prior, rising from $352.13 million to $467.84 million.
- Powered by its strong earnings growth of 31.81% and other important driving factors, this stock has surged by 62.32% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- The gross profit margin for HDFC BANK LTD is rather high; currently it is at 54.50%. Regardless of HDB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HDB's net profit margin of 17.86% compares favorably to the industry average.
HDFC Bank Limited, together with its subsidiaries, provides a range of banking and financial services to individuals and businesses in India, as well as in Bahrain and Hong Kong. The company operates in four segments: Retail Banking, Wholesale Banking, Treasury, and Other Banking Operations. HDFC has a market cap of $39.07 billion and is part of the financial sector and banking industry. Shares are up 42.3% year to date as of the close of trading on Wednesday.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.