NEW YORK ( TheStreet) -- KongZhong Corporation (Nasdaq: KONG) 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, attractive valuation levels, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • Net operating cash flow has significantly increased by 107.77% to $16.48 million when compared to the same quarter last year. In addition, KONGZHONG CORP -ADR has also vastly surpassed the industry average cash flow growth rate of -23.91%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 148.6% when compared to the same quarter one year prior, rising from $2.02 million to $5.01 million.
  • KONG's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.82, which clearly demonstrates the ability to cover short-term cash needs.
  • The revenue growth came in higher than the industry average of 7.2%. Since the same quarter one year prior, revenues slightly increased by 4.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

KongZhong Corporation, together with its subsidiaries, provides wireless interactive entertainment, media, and community services to mobile phone users in the People's Republic of China. The company has a P/E ratio of 28.1, above the average computer software & services industry P/E ratio of 13.2 and above the S&P 500 P/E ratio of 17.5. KongZhong has a market cap of $307.2 million and is part of the technology sector and computer software & services industry. Shares are up 18.2% year to date as of the close of trading on Monday.

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