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) -- Telefonica (NYSE: TEF) 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, solid stock price performance, attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- TEF's revenue growth has slightly outpaced the industry average of 4.5%. Since the same quarter one year prior, revenues slightly increased by 2.5%. 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.
- Compared to its closing price of one year ago, TEF's share price has jumped by 33.40%, 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, TEF should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- 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 Diversified Telecommunication Services industry and the overall market on the basis of return on equity, TELEFONICA SA has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- TELEFONICA SA's earnings per share declined by 5.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TELEFONICA SA reported lower earnings of $1.14 versus $1.57 in the prior year. This year, the market expects an improvement in earnings ($1.45 versus $1.14).