Luby's Inc. Stock Upgraded (LUB)

NEW YORK ( TheStreet) -- Luby's (NYSE: LUB) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • Powered by its strong earnings growth of 75.00% and other important driving factors, this stock has surged by 42.78% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Net operating cash flow has increased to $6.52 million or 10.30% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -4.15%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 131.5% when compared to the same quarter one year prior, rising from $0.73 million to $1.69 million.
  • LUBYS 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 year. We feel that this trend should continue. During the past fiscal year, LUBYS INC continued to lose money by earning -$0.03 versus -$0.50 in the prior year. This year, the market expects an improvement in earnings ($0.02 versus -$0.03).
  • The revenue growth greatly exceeded the industry average of 0.7%. Since the same quarter one year prior, revenues rose by 45.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

Luby's, Inc., together with its subsidiaries, engages in the ownership and operation of restaurants in the United States. As of November 2, 2009, the company operated 96 restaurants located throughout Texas and three other states. The company has a P/E ratio of 192.3, below the average leisure industry P/E ratio of 288.5 and above the S&P 500 P/E ratio of 17.7. Luby's has a market cap of $162.4 million and is part of the services sector and leisure industry. Shares are down 6.9% year to date as of the close of trading on Wednesday.

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

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