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) -- Sterling Financial (Nasdaq: STSA) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, solid stock price performance, growth in earnings per share 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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- The gross profit margin for STERLING FINANCIAL CORP/WA is currently very high, coming in at 89.42%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.45% is above that of the industry average.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 44.39% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- STERLING FINANCIAL CORP/WA has improved earnings per share by 6.1% 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, STERLING FINANCIAL CORP/WA reported lower earnings of $1.48 versus $6.16 in the prior year. This year, the market expects an improvement in earnings ($1.53 versus $1.48).
- The net income growth from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 5.8% when compared to the same quarter one year prior, going from $20.95 million to $22.15 million.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 16.4%. Since the same quarter one year prior, revenues fell by 16.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.