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) -- ArthroCare Corporation (Nasdaq: ARTC) 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, expanding profit margins, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- ARTC 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 5.75, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 135.06% to $19.46 million when compared to the same quarter last year. In addition, ARTHROCARE CORP has also vastly surpassed the industry average cash flow growth rate of -31.56%.
- ARTHROCARE CORP's earnings per share declined by 16.7% in the most recent quarter compared to 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, ARTHROCARE CORP turned its bottom line around by earning $1.27 versus -$0.37 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $1.27).
- The gross profit margin for ARTHROCARE CORP is currently very high, coming in at 73.20%. Regardless of ARTC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 12.11% trails the industry average.
- ARTC, with its decline in revenue, slightly underperformed the industry average of 0.6%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
-- Written by a member of TheStreet Ratings Staff