NEW YORK ( TheStreet) -- Culp (NYSE: CFI) 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 net income and growth in earnings per share. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- CULP INC has improved earnings per share by 9.8% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CULP INC increased its bottom line by earning $1.21 versus $1.01 in the prior year. For the next year, the market is expecting a contraction of 13.2% in earnings ($1.05 versus $1.21).
- The net income growth from the same quarter one year ago has exceeded that of the Textiles, Apparel & Luxury Goods industry average, but is less than that of the S&P 500. The net income increased by 10.3% when compared to the same quarter one year prior, going from $5.43 million to $5.99 million.
- CFI's debt-to-equity ratio is very low at 0.14 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 1.43, which illustrates the ability to avoid short-term cash problems.
- CFI's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 5.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.