Ellie Mae Inc Stock Upgraded (ELLI)

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) -- Ellie Mae (NYSE: ELLI) 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, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

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Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.0%. Since the same quarter one year prior, revenues slightly increased by 4.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • ELLI's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 4.60, which clearly demonstrates the ability to cover short-term cash needs.
  • Compared to its closing price of one year ago, ELLI's share price has jumped by 35.94%, exceeding the performance of the broader market during that same time frame. 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.
  • ELLIE MAE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, ELLIE MAE INC reported lower earnings of $0.45 versus $0.76 in the prior year. This year, the market expects an improvement in earnings ($0.98 versus $0.45).
  • The gross profit margin for ELLIE MAE INC is currently very high, coming in at 76.57%. Regardless of ELLI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ELLI's net profit margin of 2.43% is significantly lower than the industry average.

Ellie Mae, Inc. provides on-demand software solutions and services for the residential mortgage industry in the United States. Ellie Mae has a market cap of $908.1 million and is part of the technology sector and computer software & services industry. Shares are up 16.3% year to date as of the close of trading on Tuesday.

You can view the full Ellie Mae Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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