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) -- Capella Education Company (Nasdaq: CPLA) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
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- CPLA 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 3.13, which clearly demonstrates the ability to cover short-term cash needs.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.3%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for CAPELLA EDUCATION CO is rather high; currently it is at 62.20%. Regardless of CPLA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CPLA's net profit margin of 8.31% compares favorably to the industry average.
-- Written by a member of TheStreet Ratings Staff