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) -- Brady Corporation (NYSE: BRC) 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, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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- The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, BRC has a quick ratio of 1.98, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for BRADY CORP is rather high; currently it is at 51.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.05% is above that of the industry average.
- Net operating cash flow has increased to $20.22 million or 32.30% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -1.15%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.2%. Since the same quarter one year prior, revenues slightly dropped by 3.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- BRADY CORP's earnings per share declined by 14.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, BRADY CORP swung to a loss, reporting -$0.36 versus $2.05 in the prior year. This year, the market expects an improvement in earnings ($2.30 versus -$0.36).
-- Written by a member of TheStreet Ratings Staff