NEW YORK ( TheStreet) -- Sonic Automotive (NYSE: SAH) 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, notable return on equity, attractive valuation levels, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally poor debt management on most measures that we evaluated. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 0.8%. Since the same quarter one year prior, revenues rose by 12.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. 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.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Specialty Retail industry and the overall market, SONIC AUTOMOTIVE INC's return on equity exceeds that of both the industry average and the S&P 500.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 49.4% when compared to the same quarter one year prior, rising from $12.99 million to $19.40 million.
-- Written by a member of TheStreet RatingsStaff