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) -- Douglas Dynamics (NYSE: PLOW) 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, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- The debt-to-equity ratio is somewhat low, currently at 0.72, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with this, the company maintains a quick ratio of 2.65, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 52.05% to -$7.02 million when compared to the same quarter last year. In addition, DOUGLAS DYNAMICS INC has also vastly surpassed the industry average cash flow growth rate of -36.68%.
- 36.30% is the gross profit margin for DOUGLAS DYNAMICS INC which we consider to be strong. Regardless of PLOW's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PLOW's net profit margin of 13.70% compares favorably to the industry average.
- PLOW, with its decline in revenue, underperformed when compared the industry average of 10.3%. Since the same quarter one year prior, revenues slightly dropped by 8.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
-- Written by a member of TheStreet Ratings Staff