NEW YORK ( TheStreet) -- First Marblehead Corporation (NYSE: FMD) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year. Highlights from the ratings report include:
- Compared to other companies in the Consumer Finance industry and the overall market, FIRST MARBLEHEAD CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- FIRST MARBLEHEAD 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, FIRST MARBLEHEAD CORP reported poor results of -$2.19 versus -$1.72 in the prior year. This year, the market expects an improvement in earnings (-$1.23 versus -$2.19).
- Even though the current debt-to-equity ratio is 1.15, it is still below the industry average, suggesting that this level of debt is acceptable within the Consumer Finance industry.
- FMD'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 42.73%, 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. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.