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) -- Lender Processing Services (NYSE: LPS) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its increase in net income, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
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- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the IT Services industry average. The net income increased by 14.4% when compared to the same quarter one year prior, going from $47.12 million to $53.93 million.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- LENDER PROCESSING SERVICES has improved earnings per share by 10.3% 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, LENDER PROCESSING SERVICES reported lower earnings of $0.93 versus $1.57 in the prior year. This year, the market expects an improvement in earnings ($2.62 versus $0.93).
- Despite the weak revenue results, LPS has outperformed against the industry average of 13.2%. Since the same quarter one year prior, revenues slightly dropped by 2.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for LENDER PROCESSING SERVICES is currently lower than what is desirable, coming in at 26.60%. Regardless of LPS'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 11.43% trails the industry average.
-- Written by a member of TheStreet Ratings Staff