SureWest Communications Stock Upgraded (SURW)

NEW YORK ( TheStreet) -- SureWest Communications (Nasdaq: SURW) 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, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.6%. Since the same quarter one year prior, revenues slightly increased by 3.1%. 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.
  • The debt-to-equity ratio is somewhat low, currently at 0.78, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that SURW's debt-to-equity ratio is low, the quick ratio, which is currently 0.59, displays a potential problem in covering short-term cash needs.
  • Compared to its closing price of one year ago, SURW's share price has jumped by 72.11%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • The gross profit margin for SUREWEST COMMUNICATIONS is rather high; currently it is at 54.50%. Regardless of SURW's high profit margin, it has managed to decrease from the same period last year.
  • SUREWEST COMMUNICATIONS's earnings per share declined by 21.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SUREWEST COMMUNICATIONS reported lower earnings of $0.13 versus $0.24 in the prior year. This year, the market expects an improvement in earnings ($0.41 versus $0.13).

SureWest Communications, through its subsidiaries, provides telecommunications, digital video, Internet, data, and other facilities-based communications services in northern California, the greater Kansas City, and Kansas and Missouri areas. The company has a P/E ratio of 140.3, above the average telecommunications industry P/E ratio of 91.6 and above the S&P 500 P/E ratio of 17.7. SureWest has a market cap of $206.4 million and is part of the technology sector and telecommunications industry. Shares are up 86.3% year to date as of the close of trading on Thursday.

You can view the full SureWest Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet RatingsStaff