NEW YORK ( TheStreet) -- Speedway Motor Sports (NYSE: TRK) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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- 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 90.4% when compared to the same quarter one year prior, rising from -$1.52 million to -$0.15 million.
- SPEEDWAY MOTORSPORTS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SPEEDWAY MOTORSPORTS INC swung to a loss, reporting -$0.13 versus $1.06 in the prior year. This year, the market expects an improvement in earnings ($1.09 versus -$0.13).
- The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.98 is somewhat weak and could be cause for future problems.
- The gross profit margin for SPEEDWAY MOTORSPORTS INC is rather high; currently it is at 54.30%. Regardless of TRK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TRK's net profit margin of -0.20% significantly underperformed when compared to the industry average.
-- Written by a member of TheStreet Ratings Staff