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) -- Richardson Electronics (Nasdaq: RELL) 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 and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- RELL has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.41, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 915.87% to $6.21 million when compared to the same quarter last year. In addition, RICHARDSON ELECTRONICS LTD has also vastly surpassed the industry average cash flow growth rate of 0.48%.
- RELL, with its decline in revenue, slightly underperformed the industry average of 6.1%. Since the same quarter one year prior, revenues slightly dropped by 6.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, RICHARDSON ELECTRONICS LTD's return on equity is below that of both the industry average and the S&P 500.
- RICHARDSON ELECTRONICS LTD 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, RICHARDSON ELECTRONICS LTD increased its bottom line by earning $0.40 versus $0.09 in the prior year. For the next year, the market is expecting a contraction of 40.0% in earnings ($0.24 versus $0.40).
-- Written by a member of TheStreet Ratings Staff