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 revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 14.7%. 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.
- 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 1.28, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $103.85 million or 34.69% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 2.24%.
- The gross profit margin for RED HAT INC is currently very high, coming in at 89.70%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RHT's net profit margin of 10.90% significantly trails the industry average.
- RED HAT INC's earnings per share declined by 10.0% 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, 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 ($1.17 versus $0.74).
Red Hat, Inc. provides open source software solutions to enterprise customers worldwide. The company also offers enterprise-ready open source operating system platforms. Red Hat has a market cap of $9.72 billion and is part of the technology sector and computer software & services industry. The company has a P/E ratio of 67, above the S&P 500 P/E ratio of 17.7. Shares are up 21.7% year to date as of the close of trading on Tuesday.
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--Written by a member of TheStreet Ratings Staff.
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