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) -- CapitalSource (NYSE: CSE) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and notable return on equity. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.
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- Powered by its strong earnings growth of 40.00% and other important driving factors, this stock has surged by 43.55% 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 exceeded that of the S&P 500 and the Commercial Banks industry average. The net income increased by 17.7% when compared to the same quarter one year prior, going from $24.94 million to $29.35 million.
- CSE, with its decline in revenue, slightly underperformed the industry average of 3.5%. Since the same quarter one year prior, revenues slightly dropped by 4.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- CAPITALSOURCE INC has improved earnings per share by 40.0% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CAPITALSOURCE INC turned its bottom line around by earning $2.12 versus -$0.17 in the prior year. For the next year, the market is expecting a contraction of 70.5% in earnings ($0.63 versus $2.12).
-- Written by a member of TheStreet Ratings Staff