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) -- Rackspace Hosting (NYSE: RAX) has been reiterated by TheStreet Ratings as a buy with a ratings score of B-. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- RACKSPACE HOSTING INC has improved earnings per share by 16.7% 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. We feel that this trend should continue. During the past fiscal year, RACKSPACE HOSTING INC increased its bottom line by earning $0.75 versus $0.55 in the prior year. This year, the market expects an improvement in earnings ($0.97 versus $0.75).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Internet Software & Services industry average. The net income increased by 19.4% when compared to the same quarter one year prior, going from $25.05 million to $29.91 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 29.6%. Since the same quarter one year prior, revenues rose by 24.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Although RAX's debt-to-equity ratio of 0.15 is very low, it is currently higher than that of the industry average. To add to this, RAX has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has increased to $120.21 million or 14.56% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.56%.
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