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) -- Granite Construction (NYSE: GVA) 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, solid stock price performance, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company shows low profit margins.
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- GVA's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.42, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 192.13% to $54.79 million when compared to the same quarter last year. In addition, GRANITE CONSTRUCTION INC has also vastly surpassed the industry average cash flow growth rate of 41.91%.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- GRANITE CONSTRUCTION INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GRANITE CONSTRUCTION INC turned its bottom line around by earning $1.30 versus -$1.60 in the prior year. For the next year, the market is expecting a contraction of 2.3% in earnings ($1.27 versus $1.30).
- GVA, with its decline in revenue, underperformed when compared the industry average of 14.2%. Since the same quarter one year prior, revenues slightly dropped by 0.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
-- Written by a member of TheStreet Ratings Staff