NEW YORK ( TheStreet) -- Homeowners Choice (Nasdaq: HCII) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Insurance industry average. The net income increased by 79.5% when compared to the same quarter one year prior, rising from $1.28 million to $2.30 million.
- HCII's revenue growth trails the industry average of 20.7%. Since the same quarter one year prior, revenues slightly increased by 8.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- HCII 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.
- After a year of stock price fluctuations, the net result is that HCII's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. 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.