NEW YORK ( TheStreet) -- Changyou.com (Nasdaq: CYOU) 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, notable return on equity, attractive valuation levels and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- CYOU's very impressive revenue growth greatly exceeded the industry average of 1.4%. Since the same quarter one year prior, revenues leaped by 50.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CYOU's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CYOU has a quick ratio of 2.36, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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 Software industry and the overall market, CHANGYOU.COM LTD -ADR's return on equity significantly exceeds that of both the industry average and the S&P 500.
- CHANGYOU.COM LTD -ADR has improved earnings per share by 34.4% 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. We feel that this trend should continue. During the past fiscal year, CHANGYOU.COM LTD -ADR increased its bottom line by earning $4.61 versus $3.29 in the prior year. This year, the market expects an improvement in earnings ($4.62 versus $4.61).
-- Written by a member of TheStreet RatingsStaff