NEW YORK ( TheStreet) -- MetroCorp (Nasdaq: MCBI) 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, solid stock price performance, impressive record of earnings per share growth, notable return on equity and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The gross profit margin for METROCORP BANCSHARES INC is currently very high, coming in at 77.50%. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, MCBI's net profit margin of 14.30% significantly trails the industry average.
- Powered by its strong earnings growth of 77.77% and other important driving factors, this stock has surged by 79.72% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
- METROCORP BANCSHARES INC 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, METROCORP BANCSHARES INC turned its bottom line around by earning $0.54 versus -$0.31 in the prior year. For the next year, the market is expecting a contraction of 9.3% in earnings ($0.49 versus $0.54).
- MCBI, with its decline in revenue, slightly underperformed the industry average of 2.4%. Since the same quarter one year prior, revenues slightly dropped by 10.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, METROCORP BANCSHARES INC underperformed against that of the industry average and is significantly less than that of the S&P 500.