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) -- Xylem (NYSE: XYL) 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, solid stock price performance, growth in earnings per share, 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 somewhat disappointing return on equity.
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- XYL's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 3.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 30.78% 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, XYL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- XYLEM INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, XYLEM INC increased its bottom line by earning $1.59 versus $0.70 in the prior year. This year, the market expects an improvement in earnings ($1.63 versus $1.59).
- Despite currently having a low debt-to-equity ratio of 0.56, 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 XYL's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.54 is high and demonstrates strong liquidity.
- 43.11% is the gross profit margin for XYLEM INC which we consider to be strong. Regardless of XYL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, XYL's net profit margin of 7.56% compares favorably to the industry average.