NEW YORK (TheStreet) -- ArthroCare Corporation (Nasdaq:ARTC) 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, expanding profit margins, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 5.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ARTC 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 4.33, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for ARTHROCARE CORP is currently very high, coming in at 75.60%. Regardless of ARTC'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 14.00% trails the industry average.
- ARTHROCARE CORP's earnings per share improvement from the most recent quarter was slightly positive. 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, ARTHROCARE CORP swung to a loss, reporting -$0.37 versus $1.02 in the prior year. This year, the market expects an improvement in earnings ($1.43 versus -$0.37).
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Health Care Equipment & Supplies industry average. The net income increased by 1.5% when compared to the same quarter one year prior, going from $12.77 million to $12.96 million.
-- 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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