Forestar Group Inc. Stock Upgraded (FOR)

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) -- Forestar Group (NYSE: FOR) 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, impressive record of earnings per share growth, compelling growth in net income and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 15.1%. Since the same quarter one year prior, revenues rose by 27.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.56, is low and is below the industry average, implying that there has been successful management of debt levels.
  • FORESTAR GROUP INC reported significant earnings per share improvement 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, FORESTAR GROUP INC increased its bottom line by earning $0.36 versus $0.19 in the prior year. This year, the market expects an improvement in earnings ($0.63 versus $0.36).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Management & Development industry. The net income increased by 143.8% when compared to the same quarter one year prior, rising from -$22.88 million to $10.03 million.
  • Powered by its strong earnings growth of 143.07% and other important driving factors, this stock has surged by 43.39% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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.
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Forestar Group Inc. operates as a real estate and natural resources company. The company operates in three segments: Real Estate, Mineral Resources, and Fiber Resources. The company has a P/E ratio of 62.4, above the S&P 500 P/E ratio of 17.7. Forestar Group has a market cap of $777.3 million and is part of the financial sector and real estate industry. Shares are up 28.4% year to date as of the close of trading on Thursday.

You can view the full Forestar Group Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

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.

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