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) -- Federal Signal (NYSE: FSS) 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, increase in net income, good cash flow from operations, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.
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- The revenue growth came in higher than the industry average of 12.5%. Since the same quarter one year prior, revenues rose by 11.6%. 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.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Machinery industry. The net income increased by 130.9% when compared to the same quarter one year prior, rising from -$15.20 million to $4.70 million.
- Net operating cash flow has significantly increased by 628.57% to $25.50 million when compared to the same quarter last year. In addition, FEDERAL SIGNAL CORP has also vastly surpassed the industry average cash flow growth rate of 17.62%.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Machinery industry and the overall market on the basis of return on equity, FEDERAL SIGNAL CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Compared to its closing price of one year ago, FSS's share price has jumped by 35.08%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
-- Written by a member of TheStreet Ratings Staff