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) -- Providence Service Corporation (Nasdaq: PRSC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
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- PRSC's revenue growth has slightly outpaced the industry average of 16.6%. Since the same quarter one year prior, revenues rose by 19.0%. 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.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Net operating cash flow has significantly increased by 127.02% to $22.83 million when compared to the same quarter last year. Despite an increase in cash flow of 127.02%, PROVIDENCE SERVICE CORP is still growing at a significantly lower rate than the industry average of 413.76%.
- The debt-to-equity ratio of 1.30 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, PRSC's quick ratio is somewhat strong at 1.24, demonstrating the ability to handle short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Health Care Providers & Services industry and the overall market, PROVIDENCE SERVICE CORP's return on equity is below that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff