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) -- Lam Research Corporation (Nasdaq: LRCX) 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, expanding profit margins 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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- The revenue growth greatly exceeded the industry average of 14.7%. Since the same quarter one year prior, revenues rose by 28.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although LRCX's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 3.62, which clearly demonstrates the ability to cover short-term cash needs.
- 47.10% is the gross profit margin for LAM RESEARCH CORP which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, LRCX's net profit margin of 2.24% significantly trails the industry average.
- LAM RESEARCH 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. 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, LAM RESEARCH CORP reported lower earnings of $1.36 versus $5.79 in the prior year. This year, the market expects an improvement in earnings ($2.14 versus $1.36).
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
-- Written by a member of TheStreet Ratings Staff