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) -- Famous Dave's of America (Nasdaq: DAVE) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
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- DAVE's revenue growth has slightly outpaced the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 2.5%. 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.
- The debt-to-equity ratio is somewhat low, currently at 0.73, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that DAVE's debt-to-equity ratio is low, the quick ratio, which is currently 0.56, displays a potential problem in covering short-term cash needs.
- The share price of FAMOUS DAVES OF AMERICA INC has not done very well: it is down 8.22% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- FAMOUS DAVES OF AMERICA INC's earnings per share declined by 42.1% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, FAMOUS DAVES OF AMERICA INC reported lower earnings of $0.67 versus $0.82 in the prior year. For the next year, the market is expecting a contraction of 16.4% in earnings ($0.56 versus $0.67).
-- Written by a member of TheStreet Ratings Staff