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) -- VMware (NYSE: VMW) 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, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- VMW's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 13.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- VMW's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, VMW has a quick ratio of 2.31, which demonstrates the ability of the company to cover short-term liquidity needs.
- VMWARE INC reported significant earnings per share improvement 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, VMWARE INC increased its bottom line by earning $1.71 versus $1.67 in the prior year. This year, the market expects an improvement in earnings ($3.36 versus $1.71).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 66.7% when compared to the same quarter one year prior, rising from $156.77 million to $261.30 million.
- Net operating cash flow has increased to $637.30 million or 46.09% when compared to the same quarter last year. In addition, VMWARE INC has also vastly surpassed the industry average cash flow growth rate of -6.58%.