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) -- Lufkin Industries (Nasdaq: LUFK) 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, good cash flow from operations, growth in earnings per share and compelling growth in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.
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- The revenue growth came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 27.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, LUFK has a quick ratio of 1.85, which demonstrates the ability of the company to cover short-term liquidity needs.
- LUFKIN INDUSTRIES INC has improved earnings per share by 13.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LUFKIN INDUSTRIES INC increased its bottom line by earning $2.45 versus $2.14 in the prior year. This year, the market expects an improvement in earnings ($3.51 versus $2.45).
- Net operating cash flow has significantly increased by 281.56% to $44.03 million when compared to the same quarter last year. In addition, LUFKIN INDUSTRIES INC has also vastly surpassed the industry average cash flow growth rate of 28.66%.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Energy Equipment & Services industry average, but is greater than that of the S&P 500. The net income increased by 22.5% when compared to the same quarter one year prior, going from $20.70 million to $25.36 million.
-- Written by a member of TheStreet Ratings Staff