NEW YORK ( TheStreet) -- Frisch's Restaurants (AMEX: FRS) 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, attractive valuation levels, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- FRS's revenue growth trails the industry average of 11.4%. Since the same quarter one year prior, revenues slightly increased by 0.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- FRS's debt-to-equity ratio is very low at 0.15 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.11 is very weak and demonstrates a lack of ability to pay short-term obligations.
- FRISCH'S RESTAURANTS INC has improved earnings per share by 14.3% 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, FRISCH'S RESTAURANTS INC reported lower earnings of $1.88 versus $1.93 in the prior year. This year, the market expects an improvement in earnings ($1.97 versus $1.88).
- The net income growth from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 12.2% when compared to the same quarter one year prior, going from $2.49 million to $2.79 million.