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) -- KAR Auction Services (NYSE: KAR) 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, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
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- KAR's revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 3.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- KAR AUCTION SERVICES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, KAR AUCTION SERVICES INC increased its bottom line by earning $0.52 versus $0.51 in the prior year. This year, the market expects an improvement in earnings ($1.08 versus $0.52).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Services & Supplies industry. The net income increased by 267.1% when compared to the same quarter one year prior, rising from -$14.30 million to $23.90 million.
- Net operating cash flow has increased to $95.80 million or 25.72% when compared to the same quarter last year. In addition, KAR AUCTION SERVICES INC has also modestly surpassed the industry average cash flow growth rate of 23.81%.
- Powered by its strong earnings growth of 254.54% and other important driving factors, this stock has surged by 31.94% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
-- Written by a member of TheStreet Ratings Staff