Yahoo! Inc Stock Buy Recommendation Reiterated (YHOO)

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) -- Yahoo (Nasdaq: YHOO) has been reiterated by TheStreet Ratings as a buy with a ratings score of B- . The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for YAHOO INC is currently very high, coming in at 78.30%. Regardless of YHOO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 18.60% trails the industry average.
  • YAHOO INC reported flat earnings per share in the most recent quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, YAHOO INC reported lower earnings of $0.82 versus $0.90 in the prior year. This year, the market expects an improvement in earnings ($1.05 versus $0.82).
  • The revenue fell significantly faster than the industry average of 36.0%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.

Yahoo! Inc., together with its subsidiaries, operates as a digital media company that delivers personalized digital content and experiences worldwide. The company has a P/E ratio of 18.3, below the average internet industry P/E ratio of 18.5 and above the S&P 500 P/E ratio of 17.7. Yahoo has a market cap of $19.27 billion and is part of the technology sector and internet industry. Shares are up 0.9% year to date as of the close of trading on Friday.

You can view the full Yahoo Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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