NEW YORK ( TheStreet) -- Heritage Financial Corporation (Nasdaq: HFWA) 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, expanding profit margins and notable return on equity. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • HFWA has underperformed the S&P 500 Index, declining 14.00% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Commercial Banks industry. The net income increased by 9.8% when compared to the same quarter one year prior, going from $0.70 million to $0.76 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, HERITAGE FINANCIAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The gross profit margin for HERITAGE FINANCIAL CORP is currently very high, coming in at 70.10%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, HFWA's net profit margin of 3.60% significantly trails the industry average.
  • The revenue growth greatly exceeded the industry average of 1.7%. Since the same quarter one year prior, revenues rose by 41.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

Heritage Financial Corporation operates as the holding company for Heritage Bank and Central Valley Bank that provide various banking services to small businesses and individuals in Washington. The company has a P/E ratio of 13, below the average banking industry P/E ratio of 13.2 and below the S&P 500 P/E ratio of 17.7. Heritage Financial has a market cap of $218.4 million and is part of the financial sector and banking industry. Shares are down 4.2% year to date as of the close of trading on Thursday.

You can view the full Heritage Financial Ratings Report or get investment ideas from our investment research center.
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