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) -- Keynote Systems (Nasdaq: KEYN) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
- EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
- The revenue growth significantly trails the industry average of 32.7%. Since the same quarter one year prior, revenues slightly increased by 2.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- KEYN 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. To add to this, KEYN has a quick ratio of 2.49, which demonstrates the ability of the company to cover short-term liquidity needs.
- KEYNOTE SYSTEMS INC's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. 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, KEYNOTE SYSTEMS INC reported lower earnings of $0.25 versus $2.81 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.25).
- The gross profit margin for KEYNOTE SYSTEMS INC is rather high; currently it is at 55.20%. Regardless of KEYN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KEYN's net profit margin of 5.73% is significantly lower than the industry average.
- The share price of KEYNOTE SYSTEMS INC has not done very well: it is down 20.17% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
-- Written by a member of TheStreet Ratings Staff