NEW YORK ( TheStreet) -- Netgear (Nasdaq: NTGR) 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, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 14.9%. Since the same quarter one year prior, revenues rose by 27.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NTGR 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. To add to this, NTGR has a quick ratio of 2.34, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 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.
  • NETGEAR INC 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, NETGEAR INC increased its bottom line by earning $1.40 versus $0.25 in the prior year. This year, the market expects an improvement in earnings ($2.66 versus $1.40).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 104.3% when compared to the same quarter one year prior, rising from $13.10 million to $26.75 million.

NETGEAR, Inc. engages in the design, development, and marketing of networking products. The company has a P/E ratio of 16.6, above the average telecommunications industry P/E ratio of 16.2 and below the S&P 500 P/E ratio of 17.7. Netgear has a market cap of $1.1 billion and is part of the technology sector and telecommunications industry. Shares are down 1.8% year to date as of the close of trading on Monday.

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