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) -- Depomed (Nasdaq: DEPO) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and growth in earnings per share. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.
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- DEPO's very impressive revenue growth greatly exceeded the industry average of 7.9%. Since the same quarter one year prior, revenues leaped by 119.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Pharmaceuticals industry average. The net income increased by 73.2% when compared to the same quarter one year prior, rising from -$13.84 million to -$3.70 million.
- DEPOMED INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DEPOMED INC swung to a loss, reporting -$0.54 versus $1.26 in the prior year. This year, the market expects an improvement in earnings (-$0.03 versus -$0.54).
- In its most recent trading session, DEPO has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- 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. Compared to other companies in the Pharmaceuticals industry and the overall market, DEPOMED INC's return on equity significantly trails that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff