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) -- Cabot Microelectronics Corporation (Nasdaq: CCMP) 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, notable return on equity, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- CCMP's revenue growth trails the industry average of 14.0%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CCMP's debt-to-equity ratio of 0.65 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.07 is very high and demonstrates very strong liquidity.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, CABOT MICROELECTRONICS CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for CABOT MICROELECTRONICS CORP is rather high; currently it is at 52.70%. Regardless of CCMP'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 11.40% trails the industry average.
- CABOT MICROELECTRONICS CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CABOT MICROELECTRONICS CORP increased its bottom line by earning $2.20 versus $2.12 in the prior year. For the next year, the market is expecting a contraction of 9.1% in earnings ($2.00 versus $2.20).
-- Written by a member of TheStreet Ratings Staff