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) -- Financial Engines (Nasdaq: FNGN) 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, growth in earnings per share, good cash flow from operations, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.
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- The revenue growth came in higher than the industry average of 10.0%. Since the same quarter one year prior, revenues rose by 25.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- FINANCIAL ENGINES INC has improved earnings per share by 8.3% 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. During the past fiscal year, FINANCIAL ENGINES INC increased its bottom line by earning $0.38 versus $0.31 in the prior year. This year, the market expects an improvement in earnings ($0.65 versus $0.38).
- Net operating cash flow has slightly increased to $12.66 million or 4.20% when compared to the same quarter last year. In addition, FINANCIAL ENGINES INC has also vastly surpassed the industry average cash flow growth rate of -71.96%.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 55.23% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- The gross profit margin for FINANCIAL ENGINES INC is rather high; currently it is at 65.60%. Regardless of FNGN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 12.57% trails the industry average.
-- Written by a member of TheStreet Ratings Staff