United Community Banks Inc. Stock Upgraded (UCBI)

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) -- United Community Banks (Nasdaq: UCBI) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

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Highlights from the ratings report include:
  • UNITED COMMUNITY BANKS INC reported significant earnings per share improvement 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, UNITED COMMUNITY BANKS INC continued to lose money by earning -$12.97 versus -$27.15 in the prior year. This year, the market expects an improvement in earnings ($0.46 versus -$12.97).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Banks industry. The net income increased by 193.2% when compared to the same quarter one year prior, rising from -$11.34 million to $10.57 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • Despite the weak revenue results, UCBI has outperformed against the industry average of 18.6%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Commercial Banks industry and the overall market, UNITED COMMUNITY BANKS INC's return on equity is below that of both the industry average and the S&P 500.
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United Community Banks, Inc. operates as the bank holding company for United Community Bank that provides retail and corporate banking services to individuals and small to mid-size businesses. The company has a P/E ratio of 1.8, below the S&P 500 P/E ratio of 17.7. United Community Banks has a market cap of $354.3 million and is part of the financial sector and banking industry. Shares are up 25.3% year to date as of the close of trading on Friday.

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

-- Written by a member of TheStreet Ratings Staff

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.

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