Will This Downgrade Hurt Gartner Inc (IT) Today?

NEW YORK (TheStreet) -- Gartner Inc  (IT) has been downgraded to "market perform" from "outperform," Wells Fargo said Monday. The firm said the ratings revision was a valuation call.

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Separately, TheStreet Ratings team rates GARTNER INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate GARTNER INC (IT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, expanding profit margins, good cash flow from operations and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 20.8%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • GARTNER INC has improved earnings per share by 6.5% 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, GARTNER INC increased its bottom line by earning $1.92 versus $1.73 in the prior year. This year, the market expects an improvement in earnings ($2.22 versus $1.92).
  • The gross profit margin for GARTNER INC is rather high; currently it is at 59.65%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, IT's net profit margin of 11.79% significantly trails the industry average.
  • Net operating cash flow has slightly increased to $73.59 million or 3.55% when compared to the same quarter last year. Despite an increase in cash flow, GARTNER INC's cash flow growth rate is still lower than the industry average growth rate of 20.57%.
  • 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 35.80% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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