NEW YORK ( TheStreet) -- Heritage Commerce (Nasdaq: HTBK) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, expanding profit margins, solid stock price performance, impressive record of earnings per share growth and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 639.9% when compared to the same quarter one year prior, rising from $0.65 million to $4.82 million.
- The gross profit margin for HERITAGE COMMERCE CORP is currently very high, coming in at 81.00%. 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 32.30% trails the industry average.
- 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. Although other factors naturally played a role, the company's strong earnings growth was key. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- HERITAGE COMMERCE CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, HERITAGE COMMERCE CORP reported poor results of -$5.02 versus -$1.22 in the prior year. This year, the market expects an improvement in earnings ($0.26 versus -$5.02).
- HTBK, with its decline in revenue, slightly underperformed the industry average of 3.2%. Since the same quarter one year prior, revenues slightly dropped by 7.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.