NEW YORK ( TheStreet) -- Dril-Quip (NYSE: DRQ) 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 and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • DRQ's revenue growth trails the industry average of 38.3%. Since the same quarter one year prior, revenues rose by 10.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • DRQ's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.35, which clearly demonstrates the ability to cover short-term cash needs.
  • 41.90% is the gross profit margin for DRIL-QUIP INC which we consider to be strong. Regardless of DRQ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DRQ's net profit margin of 15.00% compares favorably to the industry average.
  • Net operating cash flow has significantly decreased to $15.80 million or 72.41% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Energy Equipment & Services industry and the overall market, DRIL-QUIP INC's return on equity is below that of both the industry average and the S&P 500.

Dril-Quip, Inc. designs, manufactures, fabricates, inspects, assembles, tests, and markets engineered offshore drilling and production equipment for use in deepwater, harsh environment, and severe service applications worldwide. The company has a P/E ratio of 30.7, equal to the average energy industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Dril-Quip has a market cap of $2.7 billion and is part of the basic materials sector and energy industry. Shares are down 12.6% year to date as of the close of trading on Thursday.

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