NEW YORK ( TheStreet) -- Sterling Construction Company (Nasdaq: STRL) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and increase in net income. 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 99.50% to $9.64 million when compared to the same quarter last year. In addition, STERLING CONSTRUCTION CO INC has also vastly surpassed the industry average cash flow growth rate of -10.89%.
  • 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 1131.5% when compared to the same quarter one year prior, rising from $0.76 million to $9.37 million.
  • STRL's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, STRL has a quick ratio of 2.40, which demonstrates the ability of the company to cover short-term liquidity needs.
  • STRL's very impressive revenue growth greatly exceeded the industry average of 4.3%. Since the same quarter one year prior, revenues leaped by 92.5%. Growth in the company's revenue appears to have helped boost the earnings per share.

Sterling Construction Company, Inc., together with its subsidiaries, operates as a heavy civil construction company that specializes in the building, reconstruction, and repair of transportation and water infrastructure primarily in Texas, Utah, and Nevada. The company has a P/E ratio of 13.6, equal to the average materials & construction industry P/E ratio and below the S&P 500 P/E ratio of 16.2. Sterling Construction has a market cap of $252.7 million and is part of the industrial goods sector and materials & construction industry. Shares are up 22.9% year to date as of the close of trading on Friday.

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