NEW YORK (TheStreet) -- WageWorks (WAGE) shares are down 12.5% to $42.78 in afternoon trading on Tuesday after the company's price target was lowered to $55 from $66 by analysts at Stifel Nicolaus before the opening bell today.
The firm reiterated its "buy" rating on the company's shares and the current price target still represents a 22% upside from the stock's current level.
The commercial services-outsourcing company reported its first quarter financial results last week, reporting first quarter earnings of 29 cents per share that topped analysts' estimates of 28 cents per share by one cent.
TheStreet Ratings team rates WAGEWORKS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate WAGEWORKS INC (WAGE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, deteriorating net income and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 1.2%. Since the same quarter one year prior, revenues rose by 36.2%. 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.
- WAGE's debt-to-equity ratio is very low at 0.27 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.11, which illustrates the ability to avoid short-term cash problems.
- Compared to its closing price of one year ago, WAGE's share price has jumped by 31.37%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Professional Services industry average. The net income has decreased by 12.5% when compared to the same quarter one year ago, dropping from $6.44 million to $5.64 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Professional Services industry and the overall market, WAGEWORKS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: WAGE Ratings Report