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) -- Capitol Federal Financial (Nasdaq: CFFN) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- The gross profit margin for CAPITOL FEDERAL FINL INC is rather high; currently it is at 61.30%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.04% is above that of the industry average.
- CAPITOL FEDERAL FINL INC reported flat earnings per share in the most recent quarter. 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, CAPITOL FEDERAL FINL INC increased its bottom line by earning $0.47 versus $0.23 in the prior year. This year, the market expects an improvement in earnings ($0.48 versus $0.47).
- CFFN, with its decline in revenue, underperformed when compared the industry average of 3.8%. Since the same quarter one year prior, revenues slightly dropped by 8.3%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, CAPITOL FEDERAL FINL INC's return on equity is below that of both the industry average and the S&P 500.
- In its most recent trading session, CFFN 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
-- Written by a member of TheStreet Ratings Staff