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) -- Otter Tail Corporation (Nasdaq: OTTR) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- The revenue growth came in higher than the industry average of 0.7%. Since the same quarter one year prior, revenues rose by 28.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 162.05% to $103.87 million when compared to the same quarter last year. In addition, OTTER TAIL CORP has also vastly surpassed the industry average cash flow growth rate of -27.26%.
- The debt-to-equity ratio is somewhat low, currently at 0.79, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.79 is somewhat weak and could be cause for future problems.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- OTTER TAIL CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, OTTER TAIL CORP turned its bottom line around by earning $0.42 versus -$0.32 in the prior year. This year, the market expects an improvement in earnings ($1.18 versus $0.42).
-- Written by a member of TheStreet Ratings Staff