NEW YORK ( TheStreet) -- Kadant (NYSE: KAI) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, robust revenue growth and largely solid financial position with reasonable debt levels by most measures. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • KAI's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.32, which illustrates the ability to avoid short-term cash problems.
  • KAI's revenue growth trails the industry average of 45.0%. Since the same quarter one year prior, revenues rose by 29.1%. 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 Machinery industry. The net income increased by 400.9% when compared to the same quarter one year prior, rising from -$1.72 million to $5.18 million.
  • KADANT INC 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, KADANT INC turned its bottom line around by earning $1.48 versus -$0.48 in the prior year. This year, the market expects an improvement in earnings ($1.70 versus $1.48).
  • Powered by its strong earnings growth of 392.85% and other important driving factors, this stock has surged by 69.20% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, KAI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

Kadant Inc. develops, manufactures, and markets equipment and products for the papermaking and paper recycling industries. The company has a P/E ratio of 18.5, equal to the average consumer non-durables industry P/E ratio and above the S&P 500 P/E ratio of 16.6. Kadant has a market cap of $335.9 million and is part of the consumer goods sector and consumer non-durables industry. Shares are up 11.4% year to date as of the close of trading on Tuesday.

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

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