NEW YORK ( TheStreet) -- Eastern Insurance Holdings (Nasdaq: EIHI) 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, 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 sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.0%. Since the same quarter one year prior, revenues slightly increased by 7.7%. 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.
  • EIHI 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.
  • Net operating cash flow has remained constant at $6.85 million with no significant change when compared to the same quarter last year. Along with maintaining stable cash flow from operations, the firm exceeded the industry average cash flow growth rate of -13.95%.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. 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.

Eastern Insurance Holdings, Inc., through its subsidiaries, provides workers compensation insurance and reinsurance products in the United States. The company has a P/E ratio of 20.8, above the S&P 500 P/E ratio of 17.7. Eastern has a market cap of $107.4 million and is part of the financial sector and insurance industry. Shares are up 13.5% year to date as of the close of trading on Tuesday.

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