Heelys Inc. Stock Upgraded (HLYS)

NEW YORK (TheStreet) -- Heelys (Nasdaq:HLYS) has been upgraded by TheStreet Ratings from sell to hold. 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 and increase in net income. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

• HLYS's very impressive revenue growth greatly exceeded the industry average of 17.2%. Since the same quarter one year prior, revenues leaped by 62.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
• HLYS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 12.25, which clearly demonstrates the ability to cover short-term cash needs.
• 36.20% is the gross profit margin for HEELYS INC which we consider to be strong. Regardless of HLYS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HLYS's net profit margin of -18.10% significantly underperformed when compared to the industry average.
• In its most recent trading session, HLYS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
• 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. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, HEELYS INC's return on equity significantly trails that of both the industry average and the S&P 500.

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Heelys, Inc., through its subsidiary, Heeling Sports Limited, designs, markets, and distributes action sports-inspired products under the HEELYS brand to the youth market. Heelys has a market cap of $49.9 million and is part of the consumer goods sector and consumer non-durables industry. Shares are up 18.9% year to date as of the close of trading on Monday.

You can view the full Heelys Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet RatingsStaff

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• Heelys Inc. Growth Rates

• Heelys Inc. Balance Sheet

• Heelys Inc. Cash Flow

• Heelys Inc. Income Statement