NEW YORK ( TheStreet) -- Lender Processing Services (NYSE: LPS) has been upgraded by TheStreet Ratings from hold to buy. Among the primary strengths of the company is its attractive valuation levels, considering its current price compared to earnings, book value and other 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:
- LENDER PROCESSING SERVICES's earnings per share declined by 10.8% 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, LENDER PROCESSING SERVICES reported lower earnings of $1.67 versus $3.37 in the prior year. This year, the market expects an improvement in earnings ($2.39 versus $1.67).
- LPS, with its decline in revenue, slightly underperformed the industry average of 2.3%. Since the same quarter one year prior, revenues slightly dropped by 8.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, LPS has underperformed the S&P 500 Index, declining 12.80% from its price level of one year ago. 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.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to other companies in the IT Services industry and the overall market on the basis of return on equity, LENDER PROCESSING SERVICES has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
-- Written by a member of TheStreet RatingsStaff