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) -- Warnaco Group (NYSE: WRC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, increase in stock price during the past year 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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- Although WRC's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. To add to this, WRC has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- 45.10% is the gross profit margin for WARNACO GROUP INC which we consider to be strong. Regardless of WRC'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 1.70% trails the industry average.
- WRC, with its decline in revenue, underperformed when compared the industry average of 19.2%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff