NEW YORK ( TheStreet) -- Washington Federal (Nasdaq: WFSL) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and increase in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, a generally disappointing performance in the stock itself and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 11.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for WASHINGTON FED INC is rather high; currently it is at 51.50%. It has increased significantly from the same period last year. Along with this, the net profit margin of 19.10% is above that of the industry average.
  • WASHINGTON FED 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, WASHINGTON FED INC increased its bottom line by earning $1.05 versus $0.47 in the prior year. For the next year, the market is expecting a contraction of 3.8% in earnings ($1.01 versus $1.05).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, WASHINGTON FED INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Net operating cash flow has significantly decreased to $53.82 million or 58.61% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Washington Federal, Inc. operates as the holding company for Washington Federal, which provides various financial services in the United States. The company has a P/E ratio of 14.9, below the average banking industry P/E ratio of 15 and below the S&P 500 P/E ratio of 17.7. Washington Federal has a market cap of $1.4 billion and is part of the financial sector and banking industry. Shares are down 20.2% year to date as of the close of trading on Monday.

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