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) -- Rosetta Stone (NYSE: RST) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.
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- Powered by its strong earnings growth of 175.00% and other important driving factors, this stock has surged by 46.62% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 180.4% when compared to the same quarter one year prior, rising from -$4.98 million to $4.01 million.
- ROSETTA STONE 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, ROSETTA STONE INC reported poor results of -$1.71 versus -$0.97 in the prior year. This year, the market expects an improvement in earnings ($0.04 versus -$1.71).
- The gross profit margin for ROSETTA STONE INC is currently very high, coming in at 83.60%. Regardless of RST's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, RST's net profit margin of 5.09% is significantly lower than the industry average.
- 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 Software industry and the overall market, ROSETTA STONE 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