Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- Red Hat (NYSE: RHT) has been reiterated by TheStreet Ratings as a buy with a ratings score of B. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- The revenue growth came in higher than the industry average of 3.6%. Since the same quarter one year prior, revenues rose by 15.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RHT 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
- RED HAT INC has improved earnings per share by 10.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, RED HAT INC increased its bottom line by earning $0.77 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($1.34 versus $0.77).
- Net operating cash flow has increased to $141.82 million or 13.99% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.07%.
- The gross profit margin for RED HAT INC is currently very high, coming in at 88.28%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RHT's net profit margin of 11.11% significantly trails the industry average.
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