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) -- Commercial Metals Company (NYSE: CMC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity, attractive valuation levels, impressive record of earnings per share growth and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Metals & Mining industry. The net income increased by 125.1% when compared to the same quarter one year prior, rising from -$120.27 million to $30.22 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Metals & Mining industry and the overall market, COMMERCIAL METALS's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 20.3%. Since the same quarter one year prior, revenues fell by 16.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- COMMERCIAL METALS 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, COMMERCIAL METALS increased its bottom line by earning $1.80 versus $0.16 in the prior year. For the next year, the market is expecting a contraction of 34.7% in earnings ($1.18 versus $1.80).
-- Written by a member of TheStreet Ratings Staff