NEW YORK ( TheStreet) -- State Auto Financial Corporation (Nasdaq: STFC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- STFC's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- Despite its growing revenue, the company underperformed as compared with the industry average of 19.8%. Since the same quarter one year prior, revenues rose by 11.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 161.1% when compared to the same quarter one year prior, rising from $14.40 million to $37.60 million.
- STATE AUTO FINANCIAL CORP reported significant earnings per share improvement 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, STATE AUTO FINANCIAL CORP increased its bottom line by earning $0.60 versus $0.26 in the prior year. This year, the market expects an improvement in earnings ($1.07 versus $0.60).