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) -- HopFed Bancorp (Nasdaq: HFBC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, reasonable valuation levels, expanding profit margins, impressive record of earnings per share growth 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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- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The gross profit margin for HOPFED BANCORP INC is currently very high, coming in at 73.95%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, HFBC's net profit margin of 10.10% significantly trails the industry average.
- HOPFED BANCORP 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, HOPFED BANCORP INC increased its bottom line by earning $0.50 versus $0.38 in the prior year. For the next year, the market is expecting a contraction of 14.0% in earnings ($0.43 versus $0.50).
- The revenue fell significantly faster than the industry average of 101.1%. Since the same quarter one year prior, revenues fell by 10.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.