NEW YORK ( TheStreet) -- Universal Forest Products (Nasdaq: UFPI) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • UFPI's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, UFPI has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
  • UFPI, with its decline in revenue, slightly underperformed the industry average of 7.2%. Since the same quarter one year prior, revenues slightly dropped by 2.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Building Products industry average, but is greater than that of the S&P 500. The net income increased by 117.3% when compared to the same quarter one year prior, rising from $2.58 million to $5.62 million.
  • UNIVERSAL FOREST PRODS INC 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, UNIVERSAL FOREST PRODS INC reported lower earnings of $0.89 versus $1.25 in the prior year. For the next year, the market is expecting a contraction of 56.2% in earnings ($0.39 versus $0.89).
  • The gross profit margin for UNIVERSAL FOREST PRODS INC is currently extremely low, coming in at 13.50%. Regardless of UFPI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.20% trails the industry average.

Universal Forest Products, Inc., through its subsidiaries, engineers, manufactures, treats, distributes, and installs lumber, composite wood, plastic, and other building products for the DIY/retail, site-built construction, manufactured housing, and industrial markets. The company has a P/E ratio of 91.4, equal to the average materials & construction industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Universal Forest has a market cap of $572.2 million and is part of the industrial goods sector and materials & construction industry. Shares are down 22.9% year to date as of the close of trading on Thursday.

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