NEW YORK ( TheStreet) -- VSE Corporation (Nasdaq: VSEC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • The revenue fell significantly faster than the industry average of 23.7%. Since the same quarter one year prior, revenues fell by 25.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Professional Services industry and the overall market, VSE CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for VSE CORP is currently extremely low, coming in at 7.70%. Regardless of VSEC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.70% trails the industry average.
  • Currently the debt-to-equity ratio of 1.62 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, VSEC's quick ratio is somewhat strong at 1.33, demonstrating the ability to handle short-term liquidity needs.

VSE Corporation focuses on providing sustainment services for the legacy systems and equipment of the U.S. Department of Defense (DoD); and professional services to the DoD and federal civilian agencies in the United States. The company has a P/E ratio of 7.6, equal to the average diversified services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. VSE has a market cap of $157.1 million and is part of the services sector and diversified services industry. Shares are down 9.1% year to date as of the close of trading on Monday.

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