NEW YORK ( TheStreet) -- Universal Health Realty (NYSE: UHT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins 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:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 11.1%. Since the same quarter one year prior, revenues rose by 10.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.78, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • 49.20% is the gross profit margin for UNIVERSAL HEALTH RLTY INCOME which we consider to be strong. Regardless of UHT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, UHT's net profit margin of 40.50% significantly outperformed against the industry.
  • After a year of stock price fluctuations, the net result is that UHT'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 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, UNIVERSAL HEALTH RLTY INCOME has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

Universal Health Realty Income Trust operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 30.2, equal to the average real estate industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Universal Health has a market cap of $461.1 million and is part of the financial sector and real estate industry. Shares are up 1.6% year to date as of the close of trading on Thursday.

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