HDFC Bank Ltd Stock Downgraded (HDB)

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) -- HDFC Bank (NYSE: HDB) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, premium valuation and feeble growth in the company's earnings per share.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.3%. Since the same quarter one year prior, revenues rose by 10.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • 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 Commercial Banks industry and the overall market, HDFC BANK LTD's return on equity exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 6.6% when compared to the same quarter one year prior, going from $330.43 million to $352.13 million.
  • HDB has underperformed the S&P 500 Index, declining 7.89% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

HDFC Bank Limited, together with its subsidiaries, provides a range of financial products and services to individuals and businesses in India, as well as in Bahrain and Hong Kong. The company operates in four segments: Retail Banking, Wholesale Banking, Treasury, and Other Banking Operations. HDFC has a market cap of $25.85 billion and is part of the financial sector and banking industry. Shares are down 20.3% year to date as of the close of trading on Friday.

You can view the full HDFC Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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