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) -- Union Drilling (Nasdaq: UDRL) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and weak operating cash flow.
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- UDRL's revenue growth has slightly outpaced the industry average of 13.4%. Since the same quarter one year prior, revenues rose by 13.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- UNION DRILLING INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, UNION DRILLING INC continued to lose money by earning -$0.23 versus -$0.69 in the prior year. This year, the market expects an improvement in earnings (-$0.15 versus -$0.23).
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- Net operating cash flow has decreased to $10.36 million or 11.25% when compared to the same quarter last year. Despite a decrease in cash flow UNION DRILLING INC is still fairing well by exceeding its industry average cash flow growth rate of -50.98%.
- The gross profit margin for UNION DRILLING INC is currently lower than what is desirable, coming in at 29.50%. Regardless of UDRL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, UDRL's net profit margin of 0.90% is significantly lower than the same period one year prior.
-- Written by a member of TheStreet Ratings Staff