NEW YORK ( TheStreet) -- Salix Pharmaceuticals (Nasdaq: SLXP) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • SLXP's very impressive revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues leaped by 81.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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. Compared to other companies in the Pharmaceuticals industry and the overall market, SALIX PHARMACEUTICALS LTD's return on equity exceeds that of both the industry average and the S&P 500.
  • SALIX PHARMACEUTICALS LTD 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. We feel that this trend should continue. During the past fiscal year, SALIX PHARMACEUTICALS LTD continued to lose money by earning -$0.51 versus -$0.89 in the prior year. This year, the market expects an improvement in earnings ($2.53 versus -$0.51).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 1359.8% when compared to the same quarter one year prior, rising from -$2.72 million to $34.28 million.
  • The gross profit margin for SALIX PHARMACEUTICALS LTD is currently very high, coming in at 81.60%. Regardless of SLXP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SLXP's net profit margin of 23.40% compares favorably to the industry average.

Salix Pharmaceuticals, Ltd. acquires, develops, and commercializes prescription drugs for the treatment of gastrointestinal disorders in the United States. The company has a P/E ratio of 27.8, below the average drugs industry P/E ratio of 47.5 and above the S&P 500 P/E ratio of 17.7. Salix has a market cap of $2 billion and is part of the health care sector and drugs industry. Shares are down 22.2% year to date as of the close of trading on Friday.

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