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) -- Health Net (NYSE: HNT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Providers & Services industry. The net income increased by 288.3% when compared to the same quarter one year prior, rising from -$26.59 million to $50.05 million.
- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, HNT has a quick ratio of 1.73, which demonstrates the ability of the company to cover short-term liquidity needs.
- HEALTH NET 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, HEALTH NET INC reported lower earnings of $0.31 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($2.11 versus $0.31).
- HNT, with its decline in revenue, underperformed when compared the industry average of 15.7%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for HEALTH NET INC is currently extremely low, coming in at 14.40%. Regardless of HNT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.78% trails the industry average.
-- Written by a member of TheStreet Ratings Staff