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) -- Northern Technologies International (Nasdaq: NTIC) 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, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- The revenue growth came in higher than the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 9.5%. 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.
- NTIC's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.25, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 390.61% to $1.20 million when compared to the same quarter last year. In addition, NORTHERN TECH INTL has also vastly surpassed the industry average cash flow growth rate of -3.26%.
- NORTHERN TECH INTL 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. 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, NORTHERN TECH INTL reported lower earnings of $0.79 versus $0.90 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.79).
- The share price of NORTHERN TECH INTL has not done very well: it is down 8.60% 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.
-- Written by a member of TheStreet Ratings Staff