NEW YORK ( TheStreet) -- First Interstate Bancsystem (Nasdaq: FIBK) 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:
- The revenue growth came in higher than the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 1.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- FIRST INTERSTATE BANCSYSTEM has improved earnings per share by 30.0% 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, FIRST INTERSTATE BANCSYSTEM increased its bottom line by earning $0.96 versus $0.79 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus $0.96).
- The gross profit margin for FIRST INTERSTATE BANCSYSTEM is currently very high, coming in at 79.40%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.80% trails the industry average.
- After a year of stock price fluctuations, the net result is that FIBK's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Commercial Banks industry and the overall market, FIRST INTERSTATE BANCSYSTEM'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