NEW YORK ( TheStreet) -- Southwest Gas Corporation (NYSE: SWX) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, solid stock price performance, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins.

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 Gas Utilities industry. The net income increased by 534.6% when compared to the same quarter one year prior, rising from -$0.93 million to $4.06 million.
  • The revenue growth significantly trails the industry average of 44.1%. Since the same quarter one year prior, revenues slightly increased by 0.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.93, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.33 is very weak and demonstrates a lack of ability to pay short-term obligations.

Southwest Gas Corporation engages in the purchase, distribution, and transportation of natural gas in Arizona, Nevada, and California. The company has a P/E ratio of 14.5, equal to the average utilities industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Southwest Gas has a market cap of $1.6 billion and is part of the utilities sector and utilities industry. Shares are down 0.9% year to date as of the close of trading on Thursday.

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