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, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

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Highlights from the ratings report include:
  • 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, YHOO's net profit margin of 18.60% compares favorably to 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 48.5%. 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.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and the Internet Software & Services industry average. The net income has decreased by 4.4% when compared to the same quarter one year ago, dropping from $236.97 million to $226.63 million.

Yahoo! Inc., together with its subsidiaries, operates as a digital media company that delivers personalized digital content and experiences worldwide. Yahoo has a market cap of $21.16 billion and is part of the technology sector and internet industry. The company has a P/E ratio of 5.5, below the S&P 500 P/E ratio of 17.7. Shares are up 10.9% 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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