NEW YORK ( TheStreet) -- Standard Microsystems Corporation (Nasdaq: SMSC) 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, good cash flow from operations, expanding profit margins, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- SMSC's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SMSC has a quick ratio of 2.01, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has increased to $16.50 million or 47.10% when compared to the same quarter last year. In addition, STANDARD MICROSYSTEMS CORP has also vastly surpassed the industry average cash flow growth rate of -8.70%.
- The gross profit margin for STANDARD MICROSYSTEMS CORP is rather high; currently it is at 59.60%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -4.60% is in-line with the industry average.
- Compared to its closing price of one year ago, SMSC's share price has jumped by 36.93%, 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.
- STANDARD MICROSYSTEMS CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, STANDARD MICROSYSTEMS CORP reported lower earnings of $0.43 versus $0.47 in the prior year. This year, the market expects an improvement in earnings ($1.73 versus $0.43).
-- Written by a member of TheStreet RatingsStaff