NEW YORK (
-- SPS Commerce
) has been downgraded by TheStreet Ratings from buy to hold. 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 and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and feeble growth in the company's earnings per share.
Highlights from the ratings report include:
- SPSC's revenue growth has slightly outpaced the industry average of 23.6%. Since the same quarter one year prior, revenues rose by 30.7%. 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.
- SPSC 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 this, the company maintains a quick ratio of 3.67, which clearly demonstrates the ability to cover short-term cash needs.
- Compared to its closing price of one year ago, SPSC's share price has jumped by 65.88%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- SPS COMMERCE INC's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SPS COMMERCE INC increased its bottom line by earning $1.06 versus $0.25 in the prior year. For the next year, the market is expecting a contraction of 61.3% in earnings ($0.41 versus $1.06).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 48.0% when compared to the same quarter one year ago, falling from $0.49 million to $0.26 million.
SPS Commerce, Inc. provides on-demand supply chain management solutions worldwide. It offers integration, collaboration, connectivity, visibility, and data analytics over the Internet using a software-as-a-service model. SPS Commerce, Inc. The company has a P/E ratio of 23.3, equal to the average diversified services industry P/E ratio and above the S&P 500 P/E ratio of 17.7. SPS has a market cap of $306.6 million and is part of the
industry. Shares are down 1.2% year to date as of the close of trading on Friday.
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-- Written by a member of TheStreet Ratings Staff