NEW YORK ( TheStreet) -- MicroStrategy (Nasdaq: MSTR) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 15.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- MSTR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.35, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for MICROSTRATEGY INC is currently very high, coming in at 80.00%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MSTR's net profit margin of 5.60% significantly trails the industry average.
- Net operating cash flow has increased to $23.93 million or 20.33% when compared to the same quarter last year. Despite an increase in cash flow, MICROSTRATEGY INC's average is still marginally south of the industry average growth rate of 23.75%.
- 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
-- Written by a member of TheStreet RatingsStaff