NEW YORK ( TheStreet) -- Landec Corporation (Nasdaq: LNDC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, 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:
- LNDC's revenue growth has slightly outpaced the industry average of 8.1%. Since the same quarter one year prior, revenues rose by 16.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- LNDC's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.47, which illustrates the ability to avoid short-term cash problems.
- LANDEC CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, LANDEC CORP increased its bottom line by earning $0.16 versus $0.15 in the prior year. This year, the market expects an improvement in earnings ($0.46 versus $0.16).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 62.5% when compared to the same quarter one year prior, rising from $2.06 million to $3.34 million.
- After a year of stock price fluctuations, the net result is that LNDC's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.