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) -- MBIA (NYSE: MBI) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself.
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- MBI's very impressive revenue growth greatly exceeded the industry average of 21.6%. Since the same quarter one year prior, revenues leaped by 150.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 Insurance industry and the overall market, MBIA INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- MBIA 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, MBIA INC turned its bottom line around by earning $6.33 versus -$6.67 in the prior year. For the next year, the market is expecting a contraction of 94.5% in earnings ($0.35 versus $6.33).
- MBI has underperformed the S&P 500 Index, declining 12.08% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- The debt-to-equity ratio is very high at 3.57 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