NEW YORK ( TheStreet) -- Diodes (Nasdaq: DIOD) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, increase in stock price during the past year 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:
- DIOD's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, DIOD has a quick ratio of 2.24, which demonstrates the ability of the company to cover short-term liquidity needs.
- After a year of stock price fluctuations, the net result is that DIOD'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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- 37.50% is the gross profit margin for DIODES INC which we consider to be strong. Regardless of DIOD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DIOD's net profit margin of 6.20% is significantly lower than the same period one year prior.
- DIOD, with its decline in revenue, underperformed when compared the industry average of 24.1%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
-- Written by a member of TheStreet RatingsStaff