NEW YORK ( TheStreet) -- Richardson Electronics (Nasdaq: RELL) 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, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- RELL's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.48 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Powered by its strong earnings growth of 125.00% and other important driving factors, this stock has surged by 55.42% 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income increased by 83.9% when compared to the same quarter one year prior, rising from $4.47 million to $8.22 million.
- RICHARDSON ELECTRONICS LTD 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 two years. We feel that this trend should continue. During the past fiscal year, RICHARDSON ELECTRONICS LTD turned its bottom line around by earning $0.17 versus -$0.72 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus $0.17).
- The revenue growth came in higher than the industry average of 7.5%. Since the same quarter one year prior, revenues rose by 18.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.