NEW YORK ( TheStreet) -- Tower Group (Nasdaq: TWGP) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures, notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins.
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- Since the same quarter one year prior, revenues slightly increased by 1.9%. 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.
- Compared to where it was trading one year ago, TWGP is up 14.11% to its most recent closing price of 21.07. Looking ahead, although the push and pull of a bull or bear market could certainly alter the outcome, our view is that this stock's positive fundamentals give it good potential for further appreciation.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company.
- The net income has decreased by 21.2% when compared to the same quarter one year ago, dropping from $19.17 million to $15.09 million.