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) -- XO Group (NYSE: XOXO) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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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. 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.
- XO GROUP 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. During the past fiscal year, XO GROUP INC increased its bottom line by earning $0.21 versus $0.10 in the prior year. This year, the market expects an improvement in earnings ($0.32 versus $0.21).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 60.4% when compared to the same quarter one year prior, rising from $1.28 million to $2.06 million.
- The revenue growth significantly trails the industry average of 44.3%. Since the same quarter one year prior, revenues slightly increased by 2.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- XOXO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.78, which clearly demonstrates the ability to cover short-term cash needs.
-- Written by a member of TheStreet Ratings Staff