NEW YORK ( TheStreet) -- Heritage Oaks Bancorp (Nasdaq: HEOP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing. Highlights from the ratings report include:
- HEOP's revenue growth has slightly outpaced the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HERITAGE OAKS BANCORP reported significant earnings per share improvement 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. This trend suggests that the performance of the business is improving. During the past fiscal year, HERITAGE OAKS BANCORP turned its bottom line around by earning $0.25 versus -$1.53 in the prior year. This year, the market expects an improvement in earnings ($0.48 versus $0.25).
- The gross profit margin for HERITAGE OAKS BANCORP is rather high; currently it is at 69.60%. Regardless of HEOP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HEOP's net profit margin of 11.10% compares favorably to the industry average.
- Powered by its strong earnings growth of 400.00% and other important driving factors, this stock has surged by 38.50% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Commercial Banks industry and the overall market, HERITAGE OAKS BANCORP's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff