NEW YORK (

TheStreet

)

-- Shaw Group

(NYSE:

SHAW

) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, disappointing return on equity and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Construction & Engineering industry. The net income increased by 407.7% when compared to the same quarter one year prior, rising from -$16.00 million to $49.24 million.
  • Net operating cash flow has increased to -$140.90 million or 37.31% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -9.15%.
  • SHAW GROUP INC reported significant earnings per share improvement 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, SHAW GROUP INC swung to a loss, reporting -$2.32 versus $0.95 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus -$2.32).
  • Currently the debt-to-equity ratio of 1.74 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.43, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Construction & Engineering industry and the overall market, SHAW GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.

The Shaw Group Inc. Shaw Group has a market cap of $1.8 billion and is part of the

industrial goods

sector and

materials & construction

industry. Shares are up 4.9% year to date as of the close of trading on Monday.

You can view the full

Shaw Group Ratings Report

or get investment ideas from our

investment research center

.

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