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) -- HMS Holdings Corporation (Nasdaq: HMSY) 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, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- The revenue growth came in higher than the industry average of 17.4%. Since the same quarter one year prior, revenues rose by 33.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.72, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 2.86, which clearly demonstrates the ability to cover short-term cash needs.
- HMS HOLDINGS 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 two years. We feel that this trend should continue. During the past fiscal year, HMS HOLDINGS CORP increased its bottom line by earning $0.58 versus $0.56 in the prior year. This year, the market expects an improvement in earnings ($0.97 versus $0.58).
- 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 79.5% when compared to the same quarter one year prior, rising from $11.13 million to $19.99 million.
- 46.90% is the gross profit margin for HMS HOLDINGS CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.01% significantly outperformed against the industry average.
-- Written by a member of TheStreet Ratings Staff