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) -- Cree (Nasdaq: CREE) 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, compelling growth in net income, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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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 22.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- CREE has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.64, which clearly demonstrates the ability to cover short-term cash needs.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 133.5% when compared to the same quarter one year prior, rising from $9.49 million to $22.16 million.
- 46.80% is the gross profit margin for CREE INC 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, CREE's net profit margin of 6.34% significantly trails the industry average.
- Powered by its strong earnings growth of 137.50% and other important driving factors, this stock has surged by 122.09% 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.
-- Written by a member of TheStreet Ratings Staff