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Owens-Corning Inc. Stock Upgraded (OC)

Stocks in this article: OC

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) -- Owens-Corning (NYSE: OC) 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, good cash flow from operations, 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.

  • 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:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.0%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.60, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.85 is somewhat weak and could be cause for future problems.
  • OWENS CORNING has improved earnings per share by 16.2% in the most recent quarter compared to the same quarter a year ago. 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, OWENS CORNING swung to a loss, reporting -$0.16 versus $2.23 in the prior year. This year, the market expects an improvement in earnings ($1.67 versus -$0.16).
  • Net operating cash flow has increased to $175.00 million or 31.57% when compared to the same quarter last year. Despite an increase in cash flow, OWENS CORNING's cash flow growth rate is still lower than the industry average growth rate of 57.41%.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

Owens Corning produces and sells glass fiber reinforcements and other materials for composite systems; and residential and commercial building materials worldwide. It operates in two segments, Composites and Building Materials. The company has a P/E ratio of 74.6, above the S&P 500 P/E ratio of 17.7. Owens-Corning has a market cap of $4.83 billion and is part of the industrial goods sector and materials & construction industry. Shares are up 3% year to date as of the close of trading on Friday.

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

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