NEW YORK ( TheStreet) -- Montpelier RE Holdings (NYSE: MRH) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. 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 7.0%. Since the same quarter one year prior, revenues rose by 21.2%. 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.
- MRH's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- MONTPELIER RE HOLDINGS's earnings per share declined by 36.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, MONTPELIER RE HOLDINGS swung to a loss, reporting -$2.01 versus $2.99 in the prior year. This year, the market expects an improvement in earnings ($2.30 versus -$2.01).
- The share price of MONTPELIER RE HOLDINGS has not done very well: it is down 12.13% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- The gross profit margin for MONTPELIER RE HOLDINGS is rather low; currently it is at 24.70%. It has decreased significantly from the same period last year. Regardless of the weak results of the gross profit margin, the net profit margin of 14.40% is above that of the industry average.
-- Written by a member of TheStreet RatingsStaff