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Quality Distribution Inc. Stock Upgraded (QLTY)

NEW YORK ( TheStreet) -- Quality Distribution (Nasdaq: QLTY) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and poor profit margins.

Highlights from the ratings report include:

  • QUALITY DISTRIBUTION INC reported significant earnings per share improvement 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, QUALITY DISTRIBUTION INC continued to lose money by earning -$0.36 versus -$9.32 in the prior year. This year, the market expects an improvement in earnings ($0.68 versus -$0.36).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Road & Rail industry. The net income increased by 1369.6% when compared to the same quarter one year prior, rising from $0.42 million to $6.19 million.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • The gross profit margin for QUALITY DISTRIBUTION INC is currently extremely low, coming in at 12.30%. Regardless of QLTY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, QLTY's net profit margin of 3.10% is significantly lower than the same period one year prior.
  • Net operating cash flow has decreased to $12.83 million or 26.64% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Quality Distribution, Inc., together with its subsidiaries, engages in the truckload transportation of bulk chemicals primarily in North America. The company involves in the bulk transportation of liquid and dry chemicals, including plastics, as well as bulk dry and liquid food-grade products. The company has a P/E ratio of 47, equal to the average transportation industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Quality Distribution has a market cap of $257.8 million and is part of the services sector and transportation industry. Shares are up 21.5% year to date as of the close of trading on Friday.

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

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