Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. NEW YORK ( TheStreet) -- Diodes (Nasdaq: DIOD) 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, increase in net income, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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- The revenue growth greatly exceeded the industry average of 12.5%. Since the same quarter one year prior, revenues rose by 34.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 29.8% when compared to the same quarter one year prior, rising from $6.65 million to $8.64 million.
- 38.03% is the gross profit margin for DIODES 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, DIOD's net profit margin of 4.02% significantly trails the industry average.
- Despite currently having a low debt-to-equity ratio of 0.31, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that DIOD's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.25 is high and demonstrates strong liquidity.
- Powered by its strong earnings growth of 28.57% and other important driving factors, this stock has surged by 42.41% 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.