NEW YORK ( TheStreet) -- Hampden Bancorp (Nasdaq: HBNK) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- HAMPDEN BANCORP INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HAMPDEN BANCORP INC turned its bottom line around by earning $0.20 versus -$0.04 in the prior year. This year, the market expects an improvement in earnings ($0.28 versus $0.20).
- The gross profit margin for HAMPDEN BANCORP INC is currently very high, coming in at 73.30%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.60% trails the industry average.
- Despite the weak revenue results, HBNK has outperformed against the industry average of 20.8%. Since the same quarter one year prior, revenues slightly dropped by 5.9%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, HAMPDEN BANCORP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.