NEW YORK (TheStreet) -- Trex Company (NYSE:TREX) 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, solid stock price performance, expanding profit margins, growth in earnings per share and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- The revenue growth greatly exceeded the industry average of 5.9%. Since the same quarter one year prior, revenues rose by 39.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- 41.40% is the gross profit margin for TREX CO INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12.80% significantly outperformed against the industry average.
- TREX CO INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TREX CO INC reported poor results of -$0.79 versus -$0.67 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus -$0.79).
- Even though the current debt-to-equity ratio is 1.21, it is still below the industry average, suggesting that this level of debt is acceptable within the Building Products industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.84 is weak.
-- Written by a member of TheStreet Ratings Staff
TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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