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) -- ArthroCare Corporation (Nasdaq: ARTC) 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, growth in earnings per share and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- ARTC's revenue growth has slightly outpaced the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 0.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ARTC has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.60, which clearly demonstrates the ability to cover short-term cash needs.
- ARTHROCARE CORP has improved earnings per share by 17.2% 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, ARTHROCARE CORP swung to a loss, reporting -$0.37 versus $1.02 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus -$0.37).
- The gross profit margin for ARTHROCARE CORP is currently very high, coming in at 74.60%. Regardless of ARTC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.40% trails the industry average.
- In its most recent trading session, ARTC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
-- Written by a member of TheStreet Ratings Staff