NEW YORK ( TheStreet) -- Destination Maternity (Nasdaq: DEST) 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, reasonable valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- DEST's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 0.7%. 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.
- Net operating cash flow has increased to $23.70 million or 31.04% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.36%.
- Although DEST's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average. Despite the fact that DEST's debt-to-equity ratio is low, the quick ratio, which is currently 0.68, displays a potential problem in covering short-term cash needs.
- The gross profit margin for DESTINATION MATERNITY CORP is rather high; currently it is at 51.10%. Regardless of DEST's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.70% trails the industry average.
-- Written by a member of TheStreet RatingsStaff