NEW YORK ( TheStreet) -- GOVERNMENT PROPERTIES INCOME TRUST (NYSE: GOV) 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, growth in earnings per share, compelling growth in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- In its most recent trading session, GOV has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income increased by 49.7% when compared to the same quarter one year prior, rising from $6.85 million to $10.25 million.
- GOVERNMENT PPTYS INCOME TR's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, GOVERNMENT PPTYS INCOME TR reported lower earnings of $0.83 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($0.96 versus $0.83).
- GOV's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- GOV's very impressive revenue growth greatly exceeded the industry average of 7.0%. Since the same quarter one year prior, revenues leaped by 67.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.