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) -- KBR (NYSE: KBR) 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, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- KBR's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.47, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to -$93.00 million or 13.08% when compared to the same quarter last year. In addition, KBR INC has also vastly surpassed the industry average cash flow growth rate of -112.86%.
- KBR INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, KBR INC reported lower earnings of $0.96 versus $3.16 in the prior year. This year, the market expects an improvement in earnings ($2.70 versus $0.96).
- KBR, with its decline in revenue, underperformed when compared the industry average of 10.9%. Since the same quarter one year prior, revenues slightly dropped by 6.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
-- Written by a member of TheStreet Ratings Staff