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) -- AOL (NYSE: AOL) 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, revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins.
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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 Internet Software & Services industry. The net income increased by 56.6% when compared to the same quarter one year prior, rising from $22.80 million to $35.70 million.
- AOL's revenue growth trails the industry average of 33.0%. Since the same quarter one year prior, revenues slightly increased by 3.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- AOL's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AOL has a quick ratio of 1.60, which demonstrates the ability of the company to cover short-term liquidity needs.
- 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. Compared to other companies in the Internet Software & Services industry and the overall market, AOL INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
-- Written by a member of TheStreet Ratings Staff