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) -- PHH Corporation (NYSE: PHH) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.
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- PHH CORP 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PHH CORP turned its bottom line around by earning $0.45 versus -$2.29 in the prior year. This year, the market expects an improvement in earnings ($2.73 versus $0.45).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Financial Services industry. The net income increased by 346.1% when compared to the same quarter one year prior, rising from $13.00 million to $58.00 million.
- The gross profit margin for PHH CORP is rather high; currently it is at 59.70%. Regardless of PHH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.52% trails the industry average.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Financial Services industry and the overall market, PHH CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio is very high at 4.29 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
-- Written by a member of TheStreet Ratings Staff