NEW YORK ( TheStreet) -- Yahoo (Nasdaq: YHOO) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The gross profit margin for YAHOO INC is currently very high, coming in at 82.70%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 24.10% trails the industry average.
- Net operating cash flow has slightly increased to $353.48 million or 2.02% when compared to the same quarter last year. Despite an increase in cash flow, YAHOO INC's cash flow growth rate is still lower than the industry average growth rate of 30.25%.
- After a year of stock price fluctuations, the net result is that YHOO's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.
- The revenue fell significantly faster than the industry average of 27.3%. Since the same quarter one year prior, revenues fell by 24.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.