NEW YORK ( TheStreet) -- ArthroCare Corporation (Nasdaq: ARTC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the ratings report include:
  • The gross profit margin for ARTHROCARE CORP is currently very high, coming in at 76.60%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 14.50% trails the industry average.
  • Net operating cash flow has increased to $15.23 million or 35.48% when compared to the same quarter last year. In addition, ARTHROCARE CORP has also vastly surpassed the industry average cash flow growth rate of -35.95%.
  • ARTC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.08, which clearly demonstrates the ability to cover short-term cash needs.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Equipment & Supplies industry. The net income increased by 44.7% when compared to the same quarter one year prior, rising from $8.83 million to $12.77 million.
  • ARTHROCARE CORP has improved earnings per share by 40.0% 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, ARTHROCARE CORP turned its bottom line around by earning $1.03 versus -$1.25 in the prior year. This year, the market expects an improvement in earnings ($1.44 versus $1.03).

ArthroCare Corporation, a medical device company, develops, manufactures, and markets surgical products primarily based on its minimally invasive patented Coblation technology. The company has a P/E ratio of 29.6, below the average health services industry P/E ratio of 29.8 and above the S&P 500 P/E ratio of 17.7. ArthroCare has a market cap of $912.2 million and is part of the health care sector and health services industry. Shares are up 7.1% year to date as of the close of trading on Friday.

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