NEW YORK ( TheStreet) -- NewStar Financial (Nasdaq: NEWS) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, expanding profit margins, increase in stock price during the past year and increase in net income. 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 revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues slightly increased by 6.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- Net operating cash flow has significantly increased by 712.83% to $1.62 million when compared to the same quarter last year. In addition, NEWSTAR FINANCIAL INC has also vastly surpassed the industry average cash flow growth rate of 604.81%.
- NEWSTAR FINANCIAL INC reported flat earnings per share in the most recent quarter. 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, NEWSTAR FINANCIAL INC increased its bottom line by earning $0.46 versus $0.26 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus $0.46).
- The gross profit margin for NEWSTAR FINANCIAL INC is rather high; currently it is at 59.05%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 18.48% trails the industry average.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.