NEW YORK ( TheStreet) -- NetSpend Holdings (Nasdaq: NTSP) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and premium valuation. Highlights from the ratings report include:
- NTSP's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 9.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 2.59, which clearly demonstrates the ability to cover short-term cash needs.
- 36.30% is the gross profit margin for NETSPEND HOLDINGS INC which we consider to be strong. 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 11.20% trails the industry average.
- NTSP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.49%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.