NEW YORK ( TheStreet) -- Flowserve Corporation (NYSE: FLS) 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, growth in earnings per share, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • FLS's revenue growth has slightly outpaced the industry average of 14.4%. Since the same quarter one year prior, revenues rose by 17.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FLS's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.92 is somewhat weak and could be cause for future problems.
  • FLOWSERVE CORP has improved earnings per share by 8.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FLOWSERVE CORP reported lower earnings of $6.88 versus $7.59 in the prior year. This year, the market expects an improvement in earnings ($7.74 versus $6.88).
  • 35.10% is the gross profit margin for FLOWSERVE CORP which we consider to be strong. Regardless of FLS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FLS's net profit margin of 8.80% compares favorably to the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Machinery industry average. The net income increased by 7.7% when compared to the same quarter one year prior, going from $91.65 million to $98.73 million.

Flowserve Corporation develops, manufactures, and sells precision engineered flow control equipment. The company operates in three segments: FSG Engineered Product Division, FSG Industrial Product Division, and Flow Control Division segments. The company has a P/E ratio of 11.5, equal to the average industrial industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Flowserve has a market cap of $4.7 billion and is part of the industrial goods sector and industrial industry. Shares are down 25% year to date as of the close of trading on Tuesday.

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