NEW YORK ( TheStreet) -- Global Payments (NYSE: GPN) 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, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself.
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- The revenue growth came in higher than the industry average of 9.7%. Since the same quarter one year prior, revenues rose by 14.9%. 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.
- The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.41, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for GLOBAL PAYMENTS INC is rather high; currently it is at 68.60%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, GPN's net profit margin of 0.90% significantly trails the industry average.
- The share price of GLOBAL PAYMENTS INC has not done very well: it is down 12.07% 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the IT Services industry. The net income has significantly decreased by 91.3% when compared to the same quarter one year ago, falling from $58.58 million to $5.09 million.
-- Written by a member of TheStreet Ratings Staff