NEW YORK ( TheStreet) -- Arris Group (Nasdaq: ARRS) 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, good cash flow from operations, solid stock price performance 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:
- Despite its growing revenue, the company underperformed as compared with the industry average of 20.3%. Since the same quarter one year prior, revenues rose by 13.3%. 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.
- Although ARRS's debt-to-equity ratio of 0.24 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 3.93, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 1104.76% to $35.88 million when compared to the same quarter last year. In addition, ARRIS GROUP INC has also vastly surpassed the industry average cash flow growth rate of 9.20%.
- 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, despite the company's weak earnings results. 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.
- ARRIS GROUP INC's earnings per share declined by 44.4% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ARRIS GROUP INC swung to a loss, reporting -$0.18 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($0.93 versus -$0.18).
-- Written by a member of TheStreet Ratings Staff