NEW YORK ( TheStreet) -- Scholastic Corporation (Nasdaq: SCHL) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- SCHL's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.81 is somewhat weak and could be cause for future problems.
- 49.78% is the gross profit margin for SCHOLASTIC CORP which we consider to be strong. Regardless of SCHL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SCHL's net profit margin of -5.28% significantly underperformed when compared to the industry average.
- SCHL, with its decline in revenue, underperformed when compared the industry average of 1.1%. Since the same quarter one year prior, revenues fell by 18.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.