NEW YORK ( TheStreet) -- ChangYou.com Limited - Shs -A- American Dep (Nasdaq: CYOU) has been upgraded by TheStreet Ratings from hold to buy. 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, impressive record of earnings per share growth, compelling growth in net income and attractive valuation levels. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the Software industry average, but is less than that of the S&P 500. The net income increased by 23.1% when compared to the same quarter one year prior, going from $38.86 million to $47.82 million.
- CHANGYOU.COM LTD -ADR has improved earnings per share by 23.3% 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 year. We feel that this trend should continue. During the past fiscal year, CHANGYOU.COM LTD -ADR increased its bottom line by earning $3.29 versus $2.76 in the prior year. This year, the market expects an improvement in earnings ($3.86 versus $3.29).
- CYOU 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 4.07, which clearly demonstrates the ability to cover short-term cash needs.
- The revenue growth greatly exceeded the industry average of 7.5%. Since the same quarter one year prior, revenues rose by 29.8%. Growth in the company's revenue appears to have helped boost the earnings per share.