NEW YORK ( TheStreet) -- Compass Diversified Holdings (NYSE: CODI) 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, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, increase in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • 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. 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.
  • Net operating cash flow has significantly increased by 142.73% to $39.76 million when compared to the same quarter last year. In addition, COMPASS DIVERSIFIED HOLDINGS has also vastly surpassed the industry average cash flow growth rate of -109.49%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Financial Services industry. The net income increased by 56.3% when compared to the same quarter one year prior, rising from -$15.97 million to -$6.97 million.
  • CODI's debt-to-equity ratio is very low at 0.18 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 1.13, which illustrates the ability to avoid short-term cash problems.
  • The revenue growth greatly exceeded the industry average of 12.6%. Since the same quarter one year prior, revenues rose by 19.9%. Growth in the company's revenue appears to have helped boost the earnings per share.

Compass Diversified Holdings is a public investment firm specializing in acquiring controlling stakes in small to middle market companies. The firm seeks to make middle market and buyout investments. Compass Diversified has a market cap of $794.3 million and is part of the financial sector and financial services industry. Shares are down 3.9% year to date as of the close of trading on Thursday.

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

If you liked this article you might like

Freeport McMoRan, Wix, Zions Bancorporation: 'Mad Money' Lightning Round

Freeport McMoRan, Wix, Zions Bancorporation: 'Mad Money' Lightning Round

Fed Crashes the Party: Cramer's 'Mad Money' Recap (Wednesday 4/5/17)

Fed Crashes the Party: Cramer's 'Mad Money' Recap (Wednesday 4/5/17)

Buy-Rated Dividend Stocks: Top 3 Companies: CODI, GAIN, OMAB

Buy-Rated Dividend Stocks: Top 3 Companies: CODI, GAIN, OMAB

11 Top Consumer Stock Picks to Buy for the Summer and Beyond

11 Top Consumer Stock Picks to Buy for the Summer and Beyond

What To Hold: 3 Hold-Rated Dividend Stocks CMO, OXBR, CODI

What To Hold: 3 Hold-Rated Dividend Stocks CMO, OXBR, CODI