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) -- Ligand Pharmaceuticals (Nasdaq: LGND) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and increase in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.
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- LGND's very impressive revenue growth greatly exceeded the industry average of 12.8%. Since the same quarter one year prior, revenues leaped by 106.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 250.00% and other important driving factors, this stock has surged by 116.43% 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.
- LIGAND PHARMACEUTICAL 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, LIGAND PHARMACEUTICAL INC swung to a loss, reporting -$0.14 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($0.49 versus -$0.14).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Biotechnology industry and the overall market, LIGAND PHARMACEUTICAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- LGND's debt-to-equity ratio of 0.61 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.42 is very low and demonstrates very weak liquidity.
-- Written by a member of TheStreet Ratings Staff