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) -- SPS Commerce (Nasdaq: SPSC) 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, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- The revenue growth came in higher than the industry average of 29.9%. Since the same quarter one year prior, revenues rose by 41.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- SPSC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.32, which clearly demonstrates the ability to cover short-term cash needs.
- Compared to its closing price of one year ago, SPSC's share price has jumped by 63.00%, exceeding the performance of the broader market during that same time frame. 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.
- SPS COMMERCE INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, SPS COMMERCE INC reported lower earnings of $0.08 versus $1.06 in the prior year. This year, the market expects an improvement in earnings ($0.50 versus $0.08).
- The gross profit margin for SPS COMMERCE INC is currently very high, coming in at 74.30%. Regardless of SPSC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SPSC's net profit margin of 1.62% is significantly lower than the industry average.
-- Written by a member of TheStreet Ratings Staff