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) -- Perfect World (Nasdaq: PWRD) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Compared to its closing price of one year ago, PWRD's share price has jumped by 62.60%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PWRD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- PWRD's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, PWRD has a quick ratio of 1.92, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for PERFECT WORLD CO LTD is currently very high, coming in at 76.50%. Regardless of PWRD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 20.97% trails the industry average.
- PWRD, with its decline in revenue, underperformed when compared the industry average of 3.2%. Since the same quarter one year prior, revenues fell by 11.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff