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) -- Healthways (Nasdaq: HWAY) 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 notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, poor profit margins and weak operating cash flow.
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- HEALTHWAYS 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HEALTHWAYS INC turned its bottom line around by earning $0.24 versus -$4.75 in the prior year. This year, the market expects an improvement in earnings ($0.28 versus $0.24).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Providers & Services industry. The net income increased by 100.3% when compared to the same quarter one year prior, rising from -$177.07 million to $0.60 million.
- HWAY, with its decline in revenue, underperformed when compared the industry average of 17.0%. Since the same quarter one year prior, revenues slightly dropped by 2.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Net operating cash flow has declined marginally to $17.31 million or 3.64% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio of 1.04 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, HWAY maintains a poor quick ratio of 0.90, which illustrates the inability to avoid short-term cash problems.
-- Written by a member of TheStreet Ratings Staff