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KongZhong Corporation Stock Upgraded (KONG)

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) -- KongZhong Corporation (Nasdaq:KONG) 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, attractive valuation levels, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

  • EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Highlights from the ratings report include:

  • KONG's revenue growth has slightly outpaced the industry average of 1.3%. Since the same quarter one year prior, revenues slightly increased by 8.5%. 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.
  • KONG 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. To add to this, KONG has a quick ratio of 2.28, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $7.08 million or 16.98% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.72%.
  • 47.70% is the gross profit margin for KONGZHONG CORP -ADR 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, KONG's net profit margin of 11.18% significantly trails the industry average.
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KongZhong Corporation, through its subsidiaries, engages in the provision of digital entertainment services primarily in the People's Republic of China and the Asia Pacific. The company has a P/E ratio of 15.2, below the S&P 500 P/E ratio of 17.7. KongZhong has a market cap of $255.5 million and is part of the technology sector and computer software & services industry. Shares are up 11.1% year to date as of the close of trading on Tuesday.

You can view the full KongZhong 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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