NEW YORK ( TheStreet) -- HDFC Bank (NYSE: HDB) 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, notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation.

Highlights from the ratings report include:
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Commercial Banks industry average, but is greater than that of the S&P 500. The net income increased by 28.8% when compared to the same quarter one year prior, rising from $213.03 million to $274.43 million.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market, HDFC BANK LTD's return on equity exceeds that of both the industry average and the S&P 500.
  • The revenue growth came in higher than the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 27.0%. Growth in the company's revenue appears to have helped boost the earnings per share.

HDFC Bank Limited provides banking and financial services to individuals and businesses in India. The company offers savings, current, and demat accounts, as well as accepts fixed and recurring deposits. The company has a P/E ratio of 47.9, below the average banking industry P/E ratio of 61.4 and above the S&P 500 P/E ratio of 17.7. HDFC has a market cap of $137.4 billion and is part of the financial sector and banking industry. Shares are up 6.3% year to date as of the close of trading on Wednesday.

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