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) -- Pepco Holdings (NYSE: POM) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, good cash flow from operations and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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- PEPCO HOLDINGS INC has improved earnings per share by 15.8% 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, PEPCO HOLDINGS INC reported lower earnings of $0.98 versus $1.14 in the prior year. This year, the market expects an improvement in earnings ($1.12 versus $0.98).
- Net operating cash flow has slightly increased to $302.00 million or 2.37% when compared to the same quarter last year. Despite an increase in cash flow, PEPCO HOLDINGS INC's cash flow growth rate is still lower than the industry average growth rate of 18.93%.
- POM, with its decline in revenue, slightly underperformed the industry average of 0.2%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Electric Utilities industry average. The net income increased by 5.3% when compared to the same quarter one year prior, going from $112.00 million to $118.00 million.
- The gross profit margin for PEPCO HOLDINGS INC is currently lower than what is desirable, coming in at 26.71%. Regardless of POM's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.77% trails the industry average.