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Lifeway Foods Inc. Stock Upgraded (LWAY)

NEW YORK ( TheStreet) -- Lifeway Foods (Nasdaq: LWAY) 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, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 24.3%. Since the same quarter one year prior, revenues rose by 12.1%. 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.
  • Although LWAY's debt-to-equity ratio of 0.18 is very low, it is currently higher than that of the industry average. To add to this, LWAY has a quick ratio of 1.75, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $1.55 million or 35.40% when compared to the same quarter last year. Despite an increase in cash flow, LIFEWAY FOODS INC's average is still marginally south of the industry average growth rate of 39.14%.
  • 36.90% is the gross profit margin for LIFEWAY FOODS INC which we consider to be strong. Regardless of LWAY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.60% trails the industry average.
  • LIFEWAY FOODS INC's earnings per share declined by 41.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, LIFEWAY FOODS INC reported lower earnings of $0.18 versus $0.22 in the prior year. This year, the market expects an improvement in earnings ($0.25 versus $0.18).

Lifeway Foods, Inc., together with its subsidiaries, engages in the production and sale of probiotic, cultured, and functional dairy and non-dairy health food products in the United States. The company has a P/E ratio of 86.8, equal to the average food & beverage industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Lifeway has a market cap of $170.7 million and is part of the consumer goods sector and food & beverage industry. Shares are up 13.8% year to date as of the close of trading on Monday.

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

-- 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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