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) -- Ralcorp Holdings Incorporated (NYSE: RAH) 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, increase in net income, growth in earnings per share and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- The revenue growth came in higher than the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 10.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Food Products industry average. The net income increased by 5.3% when compared to the same quarter one year prior, going from $28.30 million to $29.80 million.
- RALCORP HOLDINGS INC reported significant earnings per share improvement 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, RALCORP HOLDINGS INC reported lower earnings of $2.26 versus $3.74 in the prior year. This year, the market expects an improvement in earnings ($3.10 versus $2.26).
- 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. When compared to other companies in the Food Products industry and the overall market, RALCORP HOLDINGS INC's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for RALCORP HOLDINGS INC is rather low; currently it is at 22.70%. Regardless of RAH's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.90% trails the industry average.
-- Written by a member of TheStreet Ratings Staff