NEW YORK ( TheStreet) -- RCM Technologies (Nasdaq: RCMT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Highlights from the ratings report include:
  • Net operating cash flow has increased to $10.15 million or 35.37% when compared to the same quarter last year. Despite an increase in cash flow of 35.37%, RCM TECHNOLOGIES INC is still growing at a significantly lower rate than the industry average of 91.85%.
  • After a year of stock price fluctuations, the net result is that RCMT'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.
  • RCMT, with its decline in revenue, underperformed when compared the industry average of 0.8%. Since the same quarter one year prior, revenues fell by 10.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 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 Professional Services industry and the overall market, RCM TECHNOLOGIES INC's return on equity is below that of both the industry average and the S&P 500.

RCM Technologies, Inc., together with its subsidiaries, provides business and technology solutions to commercial and government sectors in the United States, Canada, Puerto Rico, and Ireland. The company has a P/E ratio of 15.3, below the average diversified services industry P/E ratio of 22 and below the S&P 500 P/E ratio of 17.7. RCM has a market cap of $64.5 million and is part of the services sector and diversified services industry. Shares are up 8.2% year to date as of the close of trading on Monday.

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