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Iridex Corporation Stock Upgraded (IRIX)

Editor's Note: 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.

NEW YORK ( TheStreet) -- Iridex Corporation (Nasdaq: IRIX) 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 and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

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Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 5.9%. Since the same quarter one year prior, revenues slightly increased by 4.5%. 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.
  • IRIX 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 3.35, which clearly demonstrates the ability to cover short-term cash needs.
  • 49.80% is the gross profit margin for IRIDEX CORP which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, IRIX's net profit margin of 4.00% significantly trails the industry average.
  • Net operating cash flow has significantly decreased to -$0.04 million or 115.07% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Health Care Equipment & Supplies industry and the overall market, IRIDEX CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
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IRIDEX Corporation provides therapeutic based laser systems, delivery devices, and consumable instrumentation to treat sight-threatening eye diseases worldwide. The company has a P/E ratio of 30.8, above the average health services industry P/E ratio of 11.6 and above the S&P 500 P/E ratio of 17.7. Iridex has a market cap of $33.3 million and is part of the health care sector and health services industry. Shares are down 2.7% year to date as of the close of trading on Tuesday.

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

-- Written by a member of TheStreet Ratings Staff

Editor's Note: 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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