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) -- CBOE Holdings (Nasdaq: CBOE) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- CBOE HOLDINGS INC has improved earnings per share by 15.6% 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 year. We feel that this trend should continue. During the past fiscal year, CBOE HOLDINGS INC increased its bottom line by earning $1.52 versus $0.98 in the prior year. This year, the market expects an improvement in earnings ($1.65 versus $1.52).
- CBOE 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 4.12, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for CBOE HOLDINGS INC is rather high; currently it is at 54.20%. Regardless of CBOE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CBOE's net profit margin of 35.65% significantly outperformed against the industry.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 30.22% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- CBOE, with its decline in revenue, underperformed when compared the industry average of 5.2%. Since the same quarter one year prior, revenues fell by 10.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
-- Written by a member of TheStreet Ratings Staff