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) -- Mattress Firm (Nasdaq: MFRM) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.
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- MFRM's very impressive revenue growth exceeded the industry average of 26.1%. Since the same quarter one year prior, revenues leaped by 50.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- MATTRESS FIRM HOLDING CORP has improved earnings per share by 5.7% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($1.50 versus $0.97).
- MFRM has underperformed the S&P 500 Index, declining 8.51% from its price level of one year ago.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Specialty Retail industry average, but is greater than that of the S&P 500. The net income increased by 1.1% when compared to the same quarter one year prior, going from $12.31 million to $12.46 million.
- MFRM's debt-to-equity ratio of 0.90 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.29 is very low and demonstrates very weak liquidity.
-- Written by a member of TheStreet Ratings Staff