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) -- Vanguard Health Systems (NYSE: VHS) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and generally higher debt management risk.
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- VHS's revenue growth has slightly outpaced the industry average of 4.0%. Since the same quarter one year prior, revenues slightly increased by 4.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 104.26% to $210.80 million when compared to the same quarter last year. In addition, VANGUARD HEALTH SYSTEMS INC has also vastly surpassed the industry average cash flow growth rate of -28.99%.
- VANGUARD HEALTH SYSTEMS INC's earnings per share declined by 25.0% 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, VANGUARD HEALTH SYSTEMS INC increased its bottom line by earning $0.75 versus $0.70 in the prior year. This year, the market expects an improvement in earnings ($0.77 versus $0.75).
- The debt-to-equity ratio is very high at 7.62 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, VHS's quick ratio is somewhat strong at 1.27, demonstrating the ability to handle short-term liquidity needs.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Health Care Providers & Services industry. The net income has decreased by 24.9% when compared to the same quarter one year ago, dropping from $19.30 million to $14.50 million.