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) -- Consolidated Water Company (Nasdaq: CWCO) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, notable return on equity 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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- CWCO's revenue growth trails the industry average of 39.5%. Since the same quarter one year prior, revenues rose by 23.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- CWCO's debt-to-equity ratio is very low at 0.06 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 6.19, which clearly demonstrates the ability to cover short-term cash needs.
- CONSOLIDATED WATER CO INC reported flat earnings per share in the most recent quarter. Stable earnings per share over the past two years indicate the company has sound management over its earnings and share float. We anticipate the company beginning to experience more growth in the coming year. During the past fiscal year, CONSOLIDATED WATER CO INC reported lower earnings of $0.42 versus $0.43 in the prior year. This year, the market expects an improvement in earnings ($0.52 versus $0.42).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Water Utilities industry average, but is greater than that of the S&P 500. The net income increased by 1.5% when compared to the same quarter one year prior, going from $1.29 million to $1.31 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
-- Written by a member of TheStreet Ratings Staff