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) -- Sonic Corporation (Nasdaq: SONC) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
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- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 49.68% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SONC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- SONIC CORP has improved earnings per share by 8.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SONIC CORP increased its bottom line by earning $0.61 versus $0.31 in the prior year. This year, the market expects an improvement in earnings ($0.70 versus $0.61).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry average. The net income increased by 2.7% when compared to the same quarter one year prior, going from $14.41 million to $14.79 million.
- 38.60% is the gross profit margin for SONIC CORP which we consider to be strong. Regardless of SONC'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 10.08% trails the industry average.
- SONC, with its decline in revenue, slightly underperformed the industry average of 2.6%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
-- Written by a member of TheStreet Ratings Staff