NEW YORK ( TheStreet) -- OM Group (NYSE: OMG) 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 stock price during the past year and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- OM GROUP INC has improved earnings per share by 36.5% 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 year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, OM GROUP INC turned its bottom line around by earning $2.70 versus -$0.64 in the prior year. This year, the market expects earnings to be in line with last year ($2.70 versus $2.70).
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- OMG's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, OMG has a quick ratio of 2.26, which demonstrates the ability of the company to cover short-term liquidity needs.
- OMG's revenue growth trails the industry average of 22.2%. Since the same quarter one year prior, revenues slightly increased by 9.2%. Growth in the company's revenue appears to have helped boost the earnings per share.