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) -- Armstrong World Industries (NYSE:AWI) 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, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Despite its growing revenue, the company underperformed as compared with the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 4.6%. 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.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- Even though the current debt-to-equity ratio is 1.37, it is still below the industry average, suggesting that this level of debt is acceptable within the Building Products industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.47 is sturdy.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Building Products industry and the overall market, ARMSTRONG WORLD INDUSTRIES's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- ARMSTRONG WORLD INDUSTRIES's earnings per share declined by 28.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARMSTRONG WORLD INDUSTRIES increased its bottom line by earning $2.41 versus $1.91 in the prior year. For the next year, the market is expecting a contraction of 10.4% in earnings ($2.16 versus $2.41).
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