NEW YORK ( TheStreet) -- Xyratex (Nasdaq: XRTX) has been upgraded by TheStreet Ratings from hold to buy. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- XRTX 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. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.48, which illustrates the ability to avoid short-term cash problems.
- XYRATEX LTD's earnings per share declined by 36.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, XYRATEX LTD reported lower earnings of $0.97 versus $4.45 in the prior year. This year, the market expects an improvement in earnings ($1.28 versus $0.97).
- The revenue fell significantly faster than the industry average of 38.1%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for XYRATEX LTD is rather low; currently it is at 18.80%. Regardless of XRTX's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, XRTX's net profit margin of 4.80% is significantly lower than the same period one year prior.
- Net operating cash flow has decreased to $7.52 million or 21.63% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.