NEW YORK ( TheStreet) -- Lifeway Foods (Nasdaq: LWAY) 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, good cash flow from operations, growth in earnings per share and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • 44.20% is the gross profit margin for LIFEWAY FOODS INC which we consider to be strong. Regardless of LWAY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LWAY's net profit margin of 11.10% is significantly lower than the same period one year prior.
  • LIFEWAY FOODS INC has improved earnings per share by 9.1% in the most recent quarter compared to 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, LIFEWAY FOODS INC reported lower earnings of $0.22 versus $0.33 in the prior year. This year, the market expects an improvement in earnings ($0.37 versus $0.22).
  • Net operating cash flow has slightly increased to $1.14 million or 4.37% when compared to the same quarter last year. In addition, LIFEWAY FOODS INC has also vastly surpassed the industry average cash flow growth rate of -95.30%.
  • LWAY's debt-to-equity ratio is very low at 0.27 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 1.46, which illustrates the ability to avoid short-term cash problems.
  • The revenue growth significantly trails the industry average of 137.0%. Since the same quarter one year prior, revenues rose by 16.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

Lifeway Foods, Inc., together with its subsidiaries, manufactures dairy and non-dairy health food products. The company has a P/E ratio of 44.1, equal to the average food & beverage industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Lifeway has a market cap of $166.9 million and is part of the consumer goods sector and food & beverage industry. Shares are up 5.7% year to date as of the close of trading on Tuesday.

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