NEW YORK (TheStreet) -- Shares of Splunk Inc. are higher by 5.73% to $63.63 in early afternoon trading on Tuesday, following a ratings upgrade to "overweight" from "neutral" at Piper Jaffray. The firm said it raised its rating on Splunk based on its belief the stock's valuation is more reasonable after the 13% selloff in the wake of the company's fourth quarter earnings results, theflyonthewall.com reports, adding that the firm viewed Splunk's new distribution agreement with Arrow Electronics as a sign of improving demand. Splunk is a San Francisco, CA-based multinational corporation engaged in providing customers with software products allowing users to collect, index, search, monitor, and analyze data without concern over the format or source. On Monday, Splunk stock rose following a ratings upgrade to "overweight" from "equal weight" at Stephens. Separately, TheStreet Ratings team rates SPLUNK INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation: "We rate SPLUNK INC (SPLK) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share." Highlights from the analysis by TheStreet Ratings Team goes as follows: The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 74.8% when compared to the same quarter one year ago, falling from -$32.63 million to -$57.03 million. Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, SPLUNK INC's return on equity significantly trails that of both the industry average and the S&P 500. The share price of SPLUNK INC has not done very well: it is down 22.81% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time. SPLUNK 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 reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SPLUNK INC reported poor results of -$1.81 versus -$0.75 in the prior year. This year, the market expects an improvement in earnings ($0.12 versus -$1.81). The gross profit margin for SPLUNK INC is currently very high, coming in at 87.78%. Regardless of SPLK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SPLK's net profit margin of -38.69% significantly underperformed when compared to the industry average. You can view the full analysis from the report here: SPLK Ratings Report Must Read: Warren Buffett's Top 25 Stocks for 2015
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