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

)

-- Zep

(NYSE:

ZEP

) 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, growth in earnings per share, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

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Highlights from the ratings report include:

  • ZEP's revenue growth has slightly outpaced the industry average of 0.4%. Since the same quarter one year prior, revenues slightly increased by 7.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • ZEP INC has improved earnings per share by 9.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ZEP INC increased its bottom line by earning $0.99 versus $0.78 in the prior year. This year, the market expects an improvement in earnings ($1.13 versus $0.99).
  • The gross profit margin for ZEP INC is rather high; currently it is at 50.70%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, ZEP's net profit margin of 1.70% significantly trails the industry average.

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Zep Inc. produces and markets cleaning and maintenance chemicals, and related products and services for commercial, industrial, institutional, and consumer applications in North America and Europe. The company has a P/E ratio of 17, below the S&P 500 P/E ratio of 17.7. Zep has a market cap of $380.4 million and is part of the consumer goods sector and consumer non-durables industry. Shares are up 16.3% year to date as of the close of trading on Thursday.

You can view the full

Zep 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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