NEW YORK ( TheStreet) -- Centrais Eletricas Brasileiras (NYSE: EBR.B) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- The current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.07, which illustrates the ability to avoid short-term cash problems.
- ELETROBRAS-CENTR ELETR BRAS reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, ELETROBRAS-CENTR ELETR BRAS turned its bottom line around by earning $0.77 versus -$0.83 in the prior year. This year, the market expects an improvement in earnings ($2.77 versus $0.77).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Electric Utilities industry. The net income increased by 402.0% when compared to the same quarter one year prior, rising from $136.41 million to $684.73 million.
- The revenue fell significantly faster than the industry average of 7.8%. Since the same quarter one year prior, revenues fell by 45.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, ELETROBRAS-CENTR ELETR BRAS underperformed against that of the industry average and is significantly less than that of the S&P 500.