Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model NEW YORK ( TheStreet) -- Domino's Pizza (NYSE: DPZ) 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, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.
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- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 38.60% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DPZ should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- DOMINO'S PIZZA INC has improved earnings per share by 17.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DOMINO'S PIZZA INC increased its bottom line by earning $1.71 versus $1.44 in the prior year. This year, the market expects an improvement in earnings ($1.94 versus $1.71).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry average. The net income increased by 11.3% when compared to the same quarter one year prior, going from $25.25 million to $28.10 million.
- Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.77 is weak.
- Net operating cash flow has significantly increased by 128.22% to $37.89 million when compared to the same quarter last year. In addition, DOMINO'S PIZZA INC has also vastly surpassed the industry average cash flow growth rate of -15.06%.
-- Written by a member of TheStreet Ratings Staff