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) -- Clearfield (Nasdaq: CLFD) has been upgraded by TheStreet Ratings from sell to buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- CLFD's very impressive revenue growth greatly exceeded the industry average of 27.8%. Since the same quarter one year prior, revenues leaped by 83.0%. 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.
- CLFD has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.74, which clearly demonstrates the ability to cover short-term cash needs.
- 43.19% is the gross profit margin for CLEARFIELD INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 13.11% trails the industry average.
- Compared to its closing price of one year ago, CLFD's share price has jumped by 249.23%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- CLEARFIELD INC's earnings per share declined by 48.6% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, CLEARFIELD INC reported lower earnings of $0.36 versus $0.60 in the prior year. This year, the market expects an improvement in earnings ($0.53 versus $0.36).