NEW YORK ( TheStreet) -- Quanex Building Products (NYSE: NX) 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, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • QUANEX BUILDING PRODUCTS has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, QUANEX BUILDING PRODUCTS turned its bottom line around by earning $0.64 versus -$3.65 in the prior year. This year, the market expects an improvement in earnings ($0.76 versus $0.64).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Building Products industry and the overall market on the basis of return on equity, QUANEX BUILDING PRODUCTS has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • NX'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. Along with this, the company maintains a quick ratio of 2.78, which clearly demonstrates the ability to cover short-term cash needs.
  • The revenue growth came in higher than the industry average of 5.2%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

Quanex Building Products Corporation provides engineered products and aluminum sheet products. Its Engineered Products segment produces window and door components for original equipment manufacturers that primarily serve the residential construction and remodeling markets. The company has a P/E ratio of 40.8, below the average materials & construction industry P/E ratio of 42.5 and above the S&P 500 P/E ratio of 16.4. Quanex Building has a market cap of $757.3 million and is part of the industrial goods sector and materials & construction industry. Shares are up 4.7% year to date as of the close of trading on Thursday.

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