NEW YORK ( TheStreet) -- Arabian American Development Company (Nasdaq: ARSD) 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, compelling growth in net income, solid stock price performance and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • ARSD's very impressive revenue growth greatly exceeded the industry average of 13.3%. Since the same quarter one year prior, revenues leaped by 66.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.39, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, ARSD has a quick ratio of 2.36, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 135.7% when compared to the same quarter one year prior, rising from $1.67 million to $3.94 million.
  • Powered by its strong earnings growth of 128.57% and other important driving factors, this stock has surged by 67.53% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • ARABIAN AMERICAN DEVELOPMENT reported significant earnings per share improvement 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, ARABIAN AMERICAN DEVELOPMENT reported lower earnings of $0.11 versus $0.28 in the prior year. This year, the market expects an improvement in earnings ($0.17 versus $0.11).

Arabian American Development Company, through its subsidiaries, owns and operates a petrochemical facility located in southeast Texas, which specializes in high purity petrochemical solvents and other solvent type manufacturing. The company has a P/E ratio of 40.8, equal to the average energy industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Arabian American Development has a market cap of $106.4 million and is part of the basic materials sector and energy industry. Shares are up 1.6% year to date as of the close of trading on Monday.

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