NEW YORK (
) 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, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally poor debt management and disappointing return on equity.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 7.1%. Since the same quarter one year prior, revenues slightly increased by 4.8%. 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.
- Net operating cash flow has increased to $127.84 million or 20.09% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.48%.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the IT Services industry and the overall market, LENDER PROCESSING SERVICES's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for LENDER PROCESSING SERVICES is currently lower than what is desirable, coming in at 27.30%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -7.10% is significantly below that of the industry average.
Lender Processing Services, Inc. provides integrated technology and outsourced services to the mortgage lending industry in the United States. The company has a P/E ratio of 15.3, below the average diversified services industry P/E ratio of 23 and below the S&P 500 P/E ratio of 17.7. Lender Processing Services has a market cap of $2.05 billion and is part of the
industry. Shares are up 60.6% 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.