NEW YORK ( TheStreet) -- Aspen Technology (Nasdaq: AZPN) has been upgraded by TheStreet Ratings from sell to hold. 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 and compelling growth in net income. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 2.4%. Since the same quarter one year prior, revenues rose by 37.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AZPN's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.35, which illustrates the ability to avoid short-term cash problems.
  • ASPEN TECHNOLOGY INC 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ASPEN TECHNOLOGY INC turned its bottom line around by earning $0.09 versus -$1.18 in the prior year. For the next year, the market is expecting a contraction of 338.9% in earnings (-$0.22 versus $0.09).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Software industry and the overall market, ASPEN TECHNOLOGY INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has decreased to $10.43 million or 28.50% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

Aspen Technology, Inc., together with its subsidiaries, provides integrated process optimization software solutions for manufacturers in process industries, and engineering and construction firms. Aspen Technology has a market cap of $1.3 billion and is part of the technology sector and computer software & services industry. Shares are up 9.3% year to date as of the close of trading on Wednesday.

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