Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model NEW YORK ( TheStreet) -- CME Group (Nasdaq: CME) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Net operating cash flow has increased to $262.20 million or 22.52% when compared to the same quarter last year. In addition, CME GROUP INC has also vastly surpassed the industry average cash flow growth rate of -40.27%.
- The gross profit margin for CME GROUP INC is rather high; currently it is at 70.00%. Regardless of CME's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CME's net profit margin of 30.50% significantly outperformed against the industry.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- CME's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.25 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Despite the weak revenue results, CME has outperformed against the industry average of 19.3%. Since the same quarter one year prior, revenues slightly dropped by 3.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff