NEW YORK ( TheStreet) -- First Defiance Financial Corporation (Nasdaq: FDEF) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The gross profit margin for FIRST DEFIANCE FINANCIAL CP is currently very high, coming in at 72.30%. It has increased significantly from the same period last year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Thrifts & Mortgage Finance industry. The net income increased by 76.6% when compared to the same quarter one year prior, rising from $1.51 million to $2.66 million.
  • FIRST DEFIANCE FINANCIAL CP reported significant earnings per share improvement 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, FIRST DEFIANCE FINANCIAL CP increased its bottom line by earning $0.75 versus $0.64 in the prior year. This year, the market expects an improvement in earnings ($0.97 versus $0.75).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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.

First Defiance Financial Corp. operates as the holding company for First Federal Bank of the Midwest that provides financial services to communities based in northwest Ohio, northeast Indiana, and southeastern Michigan. The company has a P/E ratio of 16.2, equal to the average banking industry P/E ratio and below the S&P 500 P/E ratio of 17.7. First Defiance Financial has a market cap of $138.6 million and is part of the financial sector and banking industry. Shares are up 19.6% year to date as of the close of trading on Friday.

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