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) -- State Auto Financial Corporation (Nasdaq: STFC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- STFC's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- Net operating cash flow has significantly increased by 166.27% to $22.90 million when compared to the same quarter last year. In addition, STATE AUTO FINANCIAL CORP has also vastly surpassed the industry average cash flow growth rate of 6.58%.
- 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.
- STATE AUTO FINANCIAL 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. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STATE AUTO FINANCIAL CORP turned its bottom line around by earning $0.25 versus -$3.98 in the prior year. This year, the market expects an improvement in earnings ($0.89 versus $0.25).
-- Written by a member of TheStreet Ratings Staff