Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link
NEW YORK (
-- XO Group
) has been upgraded by TheStreet Ratings from hold to buy. 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, 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:
- XOXO's revenue growth trails the industry average of 21.3%. Since the same quarter one year prior, revenues slightly increased by 7.1%. 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.
- XOXO 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 3.15, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for XO GROUP INC is currently very high, coming in at 86.24%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -2.08% is in-line with the industry average.
- XO GROUP INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, XO GROUP INC reported lower earnings of $0.23 versus $0.36 in the prior year. This year, the market expects an improvement in earnings ($0.31 versus $0.23).
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
XO Group Inc., a consumer Internet and media company, provides multiplatform media services to the wedding, nesting, and first-time pregnancy markets in the United States. XO Group has a market cap of $321.9 million and is part of the services sector and specialty retail industry. Shares are down 17.3% year to date as of the close of trading on Monday.
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