NEW YORK ( TheStreet) -- Total System Services (NYSE: TSS) 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, good cash flow from operations, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • 39.10% is the gross profit margin for TOTAL SYSTEM SERVICES INC which we consider to be strong. Regardless of TSS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 10.70% trails the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has increased to $109.26 million or 21.28% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.84%.
  • TSS's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.84, which clearly demonstrates the ability to cover short-term cash needs.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.9%. Since the same quarter one year prior, revenues slightly increased by 1.7%. 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.

Total System Services, Inc. provides electronic payment processing, merchant services, and related services to financial and nonfinancial institutions in the United States and internationally. The company has a P/E ratio of 18, below the average diversified services industry P/E ratio of 18.4 and above the S&P 500 P/E ratio of 16.2. Total System Services has a market cap of $3.5 billion and is part of the services sector and diversified services industry. Shares are up 17.6% year to date as of the close of trading on Wednesday.

You can view the full Total System Services Ratings Report or get investment ideas from our investment research center.
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