NEW YORK ( TheStreet) -- Liquidity Service (Nasdaq: LQDT) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • LQDT's revenue growth trails the industry average of 32.7%. Since the same quarter one year prior, revenues slightly increased by 8.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LQDT 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, LQDT has a quick ratio of 2.27, which demonstrates the ability of the company to cover short-term liquidity needs.
  • LIQUIDITY SERVICES 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, LIQUIDITY SERVICES INC increased its bottom line by earning $0.71 versus $0.44 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.71).
  • Net operating cash flow has significantly increased by 51.53% to $11.39 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 35.94%.
  • Powered by its strong earnings growth of 144.44% and other important driving factors, this stock has surged by 144.34% 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.

Liquidity Services, Inc. operates various online auction marketplaces for surplus and salvage consumer goods and capital assets. The company has a P/E ratio of 124.3, equal to the average internet industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Liquidity Service has a market cap of $978.1 million and is part of the technology sector and internet industry. Shares are up 163.1% year to date as of the close of trading on Wednesday.

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

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