NEW YORK ( TheStreet) -- Financial Engines (Nasdaq: FNGN) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and premium valuation.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 38.3%. Since the same quarter one year prior, revenues rose by 24.0%. 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.
  • FNGN has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.84, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for FINANCIAL ENGINES INC is rather high; currently it is at 65.10%. Regardless of FNGN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FNGN's net profit margin of 9.40% compares favorably to the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Capital Markets industry and the overall market, FINANCIAL ENGINES INC's return on equity is below that of both the industry average and the S&P 500.

Financial Engines, Inc. and its subsidiaries provide independent, technology-enabled portfolio management services, investment advice, and retirement income services to participants in employer-sponsored defined contribution plans, such as 401(k) plans. The company has a P/E ratio of 66.6, equal to the average financial services industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Financial Engines has a market cap of $999.7 million and is part of the financial sector and financial services industry. Shares are up 12% year to date as of the close of trading on Friday.

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