Editor's Note: 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.
NEW YORK (
-- Red Hat
) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, compelling growth in net income and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 18.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RHT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.26, which illustrates the ability to avoid short-term cash problems.
- RED HAT INC has improved earnings per share by 11.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, RED HAT INC increased its bottom line by earning $0.74 versus $0.54 in the prior year. This year, the market expects an improvement in earnings ($1.19 versus $0.74).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Software industry average. The net income increased by 15.4% when compared to the same quarter one year prior, going from $32.45 million to $37.46 million.
- The gross profit margin for RED HAT INC is currently very high, coming in at 89.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.90% is above that of the industry average.
Red Hat, Inc. provides open source software solutions to enterprise customers worldwide. The company also offers enterprise-ready open source operating system platforms. The company has a P/E ratio of 75, below the average computer software & services industry P/E ratio of 75.7 and above the S&P 500 P/E ratio of 17.7. Red Hat has a market cap of $11.25 billion and is part of the
industry. Shares are up 39.9% year to date as of the close of trading on Friday.
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--Written by a member of TheStreet Ratings Staff.