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) -- Computer Sciences Corporation (NYSE: CSC) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including poor profit margins and generally higher debt management risk.
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- 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. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 104.5% when compared to the same quarter one year prior, rising from -$2,877.00 million to $130.00 million.
- COMPUTER SCIENCES CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, COMPUTER SCIENCES CORP swung to a loss, reporting -$27.37 versus $4.50 in the prior year. This year, the market expects an improvement in earnings ($2.20 versus -$27.37).
- The debt-to-equity ratio of 1.18 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, CSC's quick ratio is somewhat strong at 1.23, demonstrating the ability to handle short-term liquidity needs.
- The gross profit margin for COMPUTER SCIENCES CORP is rather low; currently it is at 22.30%. Regardless of CSC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CSC's net profit margin of 3.40% is significantly lower than the same period one year prior.
-- Written by a member of TheStreet Ratings Staff