Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK (TheStreet) -- Resources Connection (Nasdaq:RECN) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, increase in stock price during the past year, 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.
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- Net operating cash flow has slightly increased to $16.92 million or 2.08% when compared to the same quarter last year. Despite an increase in cash flow, RESOURCES CONNECTION INC's average is still marginally south of the industry average growth rate of 6.17%.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- 38.88% is the gross profit margin for RESOURCES CONNECTION INC which we consider to be strong. Regardless of RECN'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 3.79% trails the industry average.
- RESOURCES CONNECTION INC's earnings per share declined by 38.1% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, RESOURCES CONNECTION INC reported lower earnings of $0.50 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($0.60 versus $0.50).
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