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) -- Zumiez (Nasdaq: ZUMZ) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, robust revenue growth, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.
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- ZUMIEZ INC reported significant earnings per share improvement 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, ZUMIEZ INC increased its bottom line by earning $1.35 versus $1.19 in the prior year. This year, the market expects an improvement in earnings ($1.59 versus $1.35).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 127.2% when compared to the same quarter one year prior, rising from $2.09 million to $4.74 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 19.9%. Since the same quarter one year prior, revenues rose by 16.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- 38.95% is the gross profit margin for ZUMIEZ INC which we consider to be strong. Regardless of ZUMZ'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 3.00% trails the industry average.