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) -- Iridex Corporation (Nasdaq: IRIX) 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, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 7.0%. 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.
- IRIX 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 2.73, which clearly demonstrates the ability to cover short-term cash needs.
- 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- IRIDEX CORP 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, IRIDEX CORP swung to a loss, reporting -$0.02 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($0.13 versus -$0.02).
- 47.00% is the gross profit margin for IRIDEX CORP which we consider to be strong. Regardless of IRIX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IRIX's net profit margin of 2.62% is significantly lower than the industry average.
-- Written by a member of TheStreet Ratings Staff