NEW YORK ( TheStreet) -- Otter Tail Corporation (Nasdaq: OTTR) 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, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth and increase 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 came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 21.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has significantly increased by 245.97% to $39.64 million when compared to the same quarter last year. In addition, OTTER TAIL CORP has also vastly surpassed the industry average cash flow growth rate of -2.07%.
  • OTTER TAIL CORP 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, OTTER TAIL CORP swung to a loss, reporting -$0.21 versus $0.71 in the prior year. This year, the market expects an improvement in earnings ($0.68 versus -$0.21).
  • The net income growth from the same quarter one year ago has exceeded that of the Electric Utilities industry average, but is less than that of the S&P 500. The net income increased by 4.4% when compared to the same quarter one year prior, going from $6.10 million to $6.37 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.74, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.

Otter Tail Corporation engages in electric and nonelectric operations in the United States and internationally. It operates in six segments: Electric, Plastics, Manufacturing, Health Services, Food Ingredient Processing, and Other Business Operations. The company has a P/E ratio of 30.7, above the average utilities industry P/E ratio of 24.4 and above the S&P 500 P/E ratio of 17.7. Otter Tail has a market cap of $775 million and is part of the utilities sector and utilities industry. Shares are down 4.3% year to date as of the close of trading on Thursday.

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