NEW YORK (
-- Lender Processing Services
) 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, attractive valuation levels and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally poor debt management and a generally disappointing performance in the stock itself.
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 IT Services industry. The net income has decreased by 5.6% when compared to the same quarter one year ago, dropping from $74.90 million to $70.72 million.
- The debt-to-equity ratio is very high at 2.37 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. Even though the debt-to-equity ratio is weak, LPS's quick ratio is somewhat strong at 1.02, demonstrating the ability to handle short-term liquidity needs.
- Net operating cash flow has slightly increased to $156.98 million or 5.67% when compared to the same quarter last year. Despite an increase in cash flow, LENDER PROCESSING SERVICES's average is still marginally south of the industry average growth rate of 11.21%.
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.0%. Since the same quarter one year prior, revenues slightly increased by 5.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
Lender Processing Services, Inc. provides integrated technology and outsourced services to the mortgage lending industry in the United States. The company operates through two segments, Technology, Data, and Analytics; and Loan Transaction Services. The company has a P/E ratio of 9.7, equal to the average diversified services industry P/E ratio and below the S&P 500 P/E ratio of 16.4. Lender Processing Services has a market cap of $2.7 billion and is part of the
industry. Shares are up 2.3% year to date as of the close of trading on Wednesday.
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