NEW YORK ( TheStreet) -- Donegal Group (Nasdaq: DGICB) 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, reasonable valuation levels, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 838.7% when compared to the same quarter one year prior, rising from $0.24 million to $2.21 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- DGICB's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- DGICB's revenue growth has slightly outpaced the industry average of 8.6%. Since the same quarter one year prior, revenues rose by 13.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.